Artificial intelligence poses a number of questions for financial advisers, but not so many answers.
Just to be clear, I’ve only got questions in this piece. If you’re looking for answers, I encourage you to get in touch with me so we can discuss this, at length, over a drink.
The conventional wisdom of financial planning goes something like this:
1. Young, educated client has salary and no assets. Adviser helps them protect their income and grow some assets.
2. Slightly less young client has more salary and some assets. Adviser bolsters protection and doubles down on development of asset base.
3. Experienced client retires from work. Salary stops, but asset base is sufficient to provide income.
Through this process, the adviser has helped the client use their salary to build an asset base. Adding lump sum and income protection has ensured that in case of the unexpected, plans don’t collapse.
Now consider an alternate reality (not quite like an alternate fact). What if artificial intelligence meant that your client never got a job in the first place? Or had to take a lower paying job? Is this so far-fetched?
Here is a sample list of inconvenient truths about the effects of robots replacing humans in factories, self-driving cars replacing drivers and more:
· American entrepreneur, Mark Cuban says, “Automation is going to cause unemployment and we need to prepare for it.”
· Uber is running a trial with self-driving cars in Arizona.
· Speaking about the job market, former US president Barack Obama says, “Automation is relentless and it’s going to accelerate.”
· Apple’s main supplier in China, Foxconn has made 60,000 of its 110,000 staff redundant as it replaced them with robots.
There are two main arguments that I hear about this:
1. But new jobs will be created in technology to program the robots.
2. A Universal Basic Income will take care of all.
I think I’m reasonably intelligent. I even run a technology business. I can tell you now, I’ll never be programming robots. Realistically, how many people could be? There will not be enough jobs to go around. Universal Basic Income is a brilliant idea and hopefully can be executed. However, there needs to be a tax base to fund it and taxing multi-nationals hasn’t been a very successful strategy so far. Also, will your clients want to rely on a UBI?
What will their lives be like? Will they have different goals around education and recreation? What about their existing or future children? What plans will they need to implement today to assist their children down the track? Will your clients need a completely different set of services to what you provide them today?
At some point, the financial advisory profession will need to start wrestling with ideas that are currently completely foreign, such as what happens when clients don’t have a job. We’ve done a good job of it in the past, but the rate of change is increasing and we’re going to need to start thinking based on paradigm shifts rather than incremental change.
Let me reiterate, I’m not good for answers today. I just have some questions and think that financial advisers may need to start asking these questions in the not-too-distant future! Or maybe we can just get a robot to figure it out for us?
Daniel Gara is an executive director of AdviserLogic.
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