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The future of digital financial advice

Subscribe to Financial Services 1/17/2017 Matthew Acconciamessa and Jarrad Roeder
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The future of digital financial advice

The world of financial advice is undergoing a sea change, as advances in analytics and machine learning are contributing to the rise of so-called “robo advisors.” Indeed, the market for digital financial advice could reach a whopping $489 billion in assets under management by 2020—an increase of 2,500% from 2015.1

Against this backdrop, the Center for Financial Planning Board engaged Heidrick & Struggles to conduct a scenario-planning project to create a five-year outlook for digital financial advice. Working in conjunction with the CFP Board’s Digital Advice Working Group, we identified four scenarios that, taken together, can help financial planning professionals better prepare for an increasingly uncertain future. 

HU MA N R ESOU R CE S OFF ICE RS P R AC TICE Future of Digital Financial Advice December 2016 This paper serves as a summary and record of the work of the CFP Board Digital Advice Working Group a team of senior business executives and thought leaders in the financial advising wealth management and technology sectors who came together to better understand the potential future evolution of digital financial advice1 Spenser Segal CEO ActiFi Inc Phil Cunningham CEO Advicent Solutions Tobin McDaniel President Schwab Wealth Investment Advisory Inc Mike Greene CFP Senior Vice President Ameriprise Financial Services Natalie Wolfsen EVP Chief Commercialization Officer AssetMark Joe Ziemer Head of Communications Policy Initiatives Betterment Tom Kimberly Head of Betterment Institutional Betterment Caroline Dabu VP Head Enterprise Wealth Planning BMO Financial Group Kevin Keller CEO CFP Board Scott Smith Director of Research Cerulli Associates Tom OShea Associate Director Cerulli Associates Grant Easterbrook CoFounder Dream Forward Financial Blaine Aikin CFP Executive Chairman fi360 Arielle Schwartz Vice President Fidelity Investments John Danahy Head of Digital Managed Account Solutions Fidelity Investments Mitch St Peter Director Business Development FutureAdvisor Joe Cianciolo Head of Sales Business Development Future Advisor Rob Stanich Wealth Management Offering Manager IBM Mike Sha Founder CEO SigFig Kevin Cimring CEO Invesco Jemstep Simon Roy President Invesco Jemstep Daniel Yeoman Associate Principal McKinsey Company Bob Curtis Founder CEO MoneyGuidePro Bill Harris CEO Personal Capital Michael Kitces CFP Partner Director of Research Pinnacle Advisory Shawn Brayman President CEO PlanPlus Inc Written By Jarrad L Roeder Engagement Lead Heidrick Struggles Claire McCusker Principal Vanguard Personal Advisor Services Vanguard Matthew Acconciamessa Consultant Heidrick Struggles 1 This paper was generated based on working group discussion and debate aimed at generating multiple alternative viewpoints and is not meant to be representative of the views of any one firm or individual that participated in the working group Working group also included additional attendees not named above Heidrick Struggles 2 Additional Contributors CFP Board Joe Maugeri CFP Managing Director Corporate Relations CFP Board Marilyn MohrmanGillis Executive Director CFP Board Center for Financial Planning CFP Board Sara Muehlbauer Corporate Relations Manager CFP Board Dan Drummond Director of External Communications CFP Board John Loper Director Corporate Relations CFP Board Heidrick Struggles John Austin PhD Facilitator Heidrick Struggles 3 Future of Digital Financial Advice Toomas Truumees Partner Head of Strategy Practice Heidrick Struggles Introduction The world of financial advice is undergoing As industry shocks and volatility continue having an rapid change Advances in analytics and increasingly valuable The CFP Board in response to the adaptive plan that acknowledges future uncertainty is machine learning have contributed to the aforementioned ambiguity in the market engaged Heidrick rise of digital financial advisors or robo project which would examine the fiveyear outlook for the Struggles in July 2016 to conduct a scenario planning advisors with assets estimated by one future of digital financial advice This multiphase process observer to grow to nearly 500 billion by which consider the alternative ways in which key variables 2020 an increase of 2500 from 20151 began with the development of four scenarios for the future affecting digital financial advice eg a fiduciary standard for digital advisors the commoditization of investment Meanwhile with the Department of Labors management might evolve These scenarios detailed in fiduciary rule putting nearly 17 billion of workshop on August 8th 2016 with the CFP Boards Digital subsequent pages were developed during a facilitated advisory fees in the crosshairs economic Advice Working Group a group of leaders from the financial and regulatory uncertainty persist Amid The scenarios created are not meant to form an exhaustive advising wealth management and technology industries this backdrop is also an expected wealth view of all possible industry outcomes in 2021 but rather to transfer of nearly 30 trillion from baby and to serve as a springboard for understanding how a boomers to millennials over the next stretch our thinking as to the extremes we may encounter range of future environments may impact key stakeholders and customers of the industry several decades which will exacerbate the With the scenarios and their respective insights as a need for financial advice that caters to a backdrop the CFP Board reconvened the Digital Advice techsavvy generation These variables to identify threats and opportunities as well as the key Working Group in Washington DC on September 9th along with other external factors combine takeaways for firms to adapt and hopefully succeed in this to cast a fog of uncertainty over how the Following that meeting Heidrick Struggles has integrated landscape of digital financial advice might evolve over the next five years2 rapidly changing environment over the next five years and synthesized the strategic insights generated throughout the multimonth process and now shares this report to help the CFP Board the industry and the financial planning profession better prepare for the future of digital financial advice See Cerulli Associates Retail Direct Firms and Digital Advice Providers 2015 Addressing Millennials the Mass Market and Robo Advice November 4 2015 cerullicom 1 For the purposes of this paper digital advice is defined as any digital online wealth management platform that provides automated financial advice directly to consumers or aids financial advisors in the analysis and recommendations for consumer clients by automating many financial planning functions formerly done solely by human advisors 2 Heidrick Struggles 4 Scenarios for the Future of Digital Financial Advice Scenario planning is a strategic planning methodology that has been applied in both business and military settings for decades The process meant to develop flexible longterm plans that can succeed regardless of how the future unfolds is in stark contrast to standard planning procedures that rely on point forecasts and a single view of how the world might look Scenarios which represent distinct stories of the future for a given industry or macro environment are created by combining the most impactful variables into cohesive narratives that tell a story This often begins by identifying two key variables that when taken to extremes intersect to create a 2x2 matrix or four potential futures Additional Today Future Today Future Traditional Planning variables are then layered beneath each cell of the matrix to build a much deeper and nuanced view into what the world might look like Together these four scenarios are not meant to be precise predictions of the future but rather to bound the realm of possibilities and widen the cone of uncertainty we consider so as to sufficiently stretch thinking in the planning process For this exercise those two major variables were the nature of consumer financial services demand whether consumers would demand holistically integrated advice covering a range of financial disciplines and consumer comfort with the digital experience the level of trust and utilization of fully digital channels By combining these axes the working Today Future group created the following 2x2 matrix to structure subsequent scenario development 5 Future of Digital Financial Advice Scenario Planning In addition the implications of each scenario for the The four emerging scenarios are Everyone Goes Digital Automation and digital tools reign supreme while regulation keeps advice fragmented amongst specialized providers human financial advisor the financial institution and the consumer are outlined along with key opportunities and threats for the financial advice industry Judgment Day Machine learning advances lead to a rise in onestopshop digital advice platforms Rise of the Humans Digital transforms the back office but customers still value the human advisor to interpret and deliver advice Back to the Future Scrutiny on fees and cybersecurity challenges lead to a demand for holistic advice from human advisors For each of the four scenarios the following pages provide a narrative overview as well as a sequence of news headlines to create a view of how that scenario may emerge over time Highly Trusted Limited Consumer Comfort with Digital Experience Consumer Financial Services Demand Fragmented Demand for Advice Preference for Holistic Advice Everyone Goes Digital Judgment Day Online or in person The onestop shop has either way its digital no need for a shopkeeper Rise of the Humans Back to the Future Where trust and accountability Consumers want more bang stem from a human touch for their buck or theyre out Heidrick Struggles 6 Everyone Goes Digital Online or in person either way its digital In 2021 digital financial advice has taken hold of large swaths of the investment management industry New tools The Financial Planner Your Guide in a World of Digital Advice and platforms have enabled highquality investment advice that is automated continuously updated and extremely cost effective Consumers increasingly comfortable with an alldigital experience perceive the performance gains from 2021 automated systems as on par with those of a human advisor and fully embrace the much lower fees offered by the digital solutions on the market The same underlying technology however is available both through directtoconsumer web Regulatory Silos Impede Ability to Provide Holistic Approach 2020 based platforms as well as backoffice tools that supplement the work done by a firms human advisors While technology has advanced across different areas of consumer financial services improving the fields of investment manag

About the authors

Matthew Acconciamessa ( and Jarrad Roeder ( are consultants in Heidrick & Struggles’ Philadelphia office and members of the Leadership Consulting Practice.


1 See Cerulli Associates, Retail Direct Firms and Digital Advice Providers 2015: Addressing Millennials, the Mass Market, and Robo Advice, November 4, 2015.

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