Alumni Column: Don’t Get Robo-ed

Max B. Haspel

Technological advances have improved living standards and increased wealth globally, but in the short-run, these same advances can displace workers who thought their careers were on solid footing. While this has long been true of lower-skill, production-oriented jobs, increasingly, the rise of artificial intelligence is impacting many fields toward which Colgate grads have historically gravitated –– including law, finance, medicine and even writing. With awareness and forethought, however, it is possible to choose a career where you will be on the right side of technology.

Since I graduated over 20 years ago, we have seen massive headcount reductions on Wall Street in what were once very high-paying sales and trading positions. We’ve also recently witnessed the rise of algorithms that forecast company earnings, potentially forcing change in the area of investment research. FinTech companies that connect lenders with borrowers have the potential to reduce the ranks of bankers who grease the wheels of our economy. And closer to home for this wealth-management entrepreneur, robo advisors have entered the scene, causing me to reflect on whether my colleagues and I will be able to continue to provide value to clients in ways that computers are not likely to.

Liberal arts graduates may be insulated from the rise of the robos, and below I’ll share why I think this is the case. My perspective is based on a 20-year career in financial services, but there are important observations here that apply to many job seekers, regardless of your field of interest.

Wealth management, done right, is a comprehensive, multidisciplinary advisory field that requires both research skills and strong interpersonal communication abilities. This includes, perhaps most importantly, the ability to listen and be empathetic, but also the wherewithal to be persuasive in helping clients take appropriate action, even when it might feel counterintuitive when they’re downright scared. The profession encompasses the areas of not just investing, but tax, financial and estate planning, risk management, insurance, lending, business-succession planning and family dynamics. Trust and credibility are paramount, so that in times of personal or financial crisis (or even the routine bear market), advice will be well received, and implemented by clients. Studies show that the average investor significantly underperforms the markets in which they invest, due to poor timing decisions. The leading contributor to this underperformance is poor investor behavior. Humans, on aggregate, can’t escape our emotionally-charged fight-or-flight genetic programming, which served our forebearers well on the savanna, but isn’t beneficial when it comes to making good financial decisions under stress. As a whole, we persistently suffer from a range of psychological traps and misconceptions. We need coaching from an empathetic and trusted professional –– and it’s highly unlikely an app will be as successful as a trusted advisor when a client needs to be “talked off the ledge.”

Good wealth management also requires the collaboration of multiple professionals, from attorneys and tax advisors, to insurance agents and lenders. From where I sit, it’s hard to imagine a robo will be successful, in the near term, at fostering collaboration among these various team players and synthesizing the output into implementable, actionable advice. It’s challenging enough just to schedule a meeting where everyone on a client’s team is available to talk at the same time. 

The world is filled with unknowns that are hard to code for. How does one build an algorithm to simultaneously account for things like a client’s career longevity, earnings, health, law changes, tax-rate environments, global and local economic and political outcomes, market sentiment, interest rates and inflation? Trying to build a model that incorporates all these factors reminds me of what a multi-model hurricane forecast map looks like when a hurricane is still in the Caribbean and there are multiple forecast track lines showing possible ultimate destinations as far ranging as Mexico and Newfoundland. Persistent uncertainty enhances human value and highlights the importance of the power of persuasion. There will be many opportunities for advisors to help clients take action (or at times not take action) in ways that will improve the probability of a favorable outcome. How persuasive they are will play a large role in determining this success.

Technology is wonderful, and successful advisors embrace it fully. They are constantly looking for and implementing solutions that increase productivity and outcomes and, I believe, ultimately make them more valuable to clients. As in medicine (i.e., surgeons who now perform less invasive surgeries with better results by using the da Vinci surgical robot) it’s likely that technology in wealth management and other fields will continue to enhance human abilities.

Regardless of the profession or career you seek after your years in Hamilton, I hope this gives you some food for thought that will help you make an informed decision and keep technology on your side.