Fintech, short for financial technology, refers to the application of technology and innovation to improve financial services. It encompasses a wide range of activities and sectors, including banking, payments, lending, investments, insurance, and more. Fintech companies aim to leverage technology to offer faster, more efficient, and and more accessible financial solutions to individuals and businesses. It is a rapidly evolving field that continues to shape the financial industry, making financial services more accessible, efficient, and customer-centric. It is driven by innovation, technological advancements, and changing consumer expectations, ultimately transforming the way we manage our finances. So far so good, but does it have the potential to permanently disrupt and change the way we give financial advice and will it therefore eventually replace traditional financial advisors? As stated in the Economics Observatory: “As fintech companies capture market share from traditional banks and other firms operating in financial services, they pose a potential threat to the stability of the financial sector by eroding profits and raising operating costs” *
Fintech tools and platforms have certainly made it easier for individuals to access financial information, make investments, and manage their finances on their own. Just consider the following:
Automated Advice: Algorithm-based platforms, have gained popularity in recent years. They provide automated investment advice based on predefined algorithms and risk profiles. They offer low-cost investment options and can be a suitable choice for individuals with straightforward financial needs.
Access to Information: Fintech has made financial information more accessible than ever before. With online tools and resources, individuals can educate themselves on various financial topics and investment strategies. They can access real-time market data, financial news, and research reports. This increased access to information empowers individuals to make more informed financial decisions on their own.
Personalised Solutions: Fintech platforms often use algorithms and data analytics to provide personalised financial solutions. By gathering information about an individual's financial situation, goals, and risk tolerance, these platforms can suggest investment portfolios or savings strategies tailored to their needs. While this approach can be beneficial for many people, some individuals may still prefer the human touch and guidance of a financial advisor.
Complex Financial Planning: While fintech tools can handle basic investment advice, more complex financial planning requires a deeper understanding of an individual's unique circumstances. Financial advisors provide personalised advice by considering multiple factors such as tax planning, estate planning, retirement planning, and risk management. They can also help clients navigate complex financial situations, provide emotional support, and adjust strategies based on changing circumstances.
Relationship and Trust: Many individuals value the relationship and trust they have with their financial advisors. Building a relationship with an advisor often involves understanding personal goals, discussing concerns, and receiving guidance during challenging financial periods. This personalised approach and the human element can be difficult to replicate through technology alone.
It's more likely that the future of financial advisory services will involve a combination of fintech and human expertise. Fintech can enhance the efficiency of financial advisors by automating routine tasks, providing data analysis, and streamlining processes. Financial advisors can leverage fintech tools to better serve their clients and focus on higher-value activities like holistic financial planning, emotional support, and building long-term relationships.
In summary, while fintech has disrupted the financial advisory industry, it is unlikely to completely replace financial advisors. The industry is evolving to incorporate both technology and human expertise, offering individuals a range of options to meet their financial needs and preferences.
* https://www.economicsobservatory.com/is-fintech-disrupting-the-banking-sector