Robo-advice tools are becoming better at providing information to clients, so advisers will need to shift their focus towards values and understanding if they are to retain their relevance to clients in the decade ahead, according to the founder and CIO of London-based Trinetra Investments, Tassos Stassopoulos.
Speaking at the recent Portfolio Construction Forum Strategies Conference in Sydney, Stassopoulos said that robo-advice will spell the end of “information advisers”, or those that position their value on data-based expertise.
“But empathetic advisers who try to help their clients live more fulfilled lives by understanding their values – as oppose to the advisers’ values – will become more relevant than ever in the 2020s,” Stassopoulos said.
The former AllianceBernstein and CreditSuisse executive said values have become increasingly marginalised by the rise of AI in recent years. Artificial intelligence has become glorified, Stassopoulos explained, and is falsely being pitched as a cure-all for investment expertise.
“I hope that in the 2020s we will stop romanticising about AI and realise that neural network algorithms depend on recognising patterns that are only well suited to certain areas,” he continued. “In the mean-time we will have to put up with all the hype (about) how AI will detect the undetectable, solve the unsolvable and predict the unpredictable…”
While Stassopoulos still believes there is alpha to be gained from taking a long-term investment outlook, the trends that lead to returns will be guided by the changing values of people, not the algorithms of machines. He says he has spent the last decade travelling the world and forming a specific process for investment “by looking at customer values and how they’re evolving”.
“I have travelled from the slums in Lagos to middle-class homes in Medellin, Colombia, from villages in Mexico to the rural grasslands of China,” he said, revealing that he shared food with locals and slept on floors to gain perspective and “learn their stories”.
“It was much more powerful than any data because it gave me insights into why trends are happening,” he continued, “I used a tool that no machine can replicate: empathy. It helps us understand people well enough to feel what they’re feeling, to feel what’s important to them and them find a solution to their needs.”
Values are important to us, he continued, as they underpin our beliefs, our biases and behaviours.
“In my number-crunching days I thought that values [were] completely irrelevant, but I was wrong,” he said.
Machines are very good at predicting short term patterns and behaviour but they can’t empathise with people or engage with them about their values and their culture, Stassopoulos continued. If machines can’t understand clients’ long-term aspirations then they can’t understand long term investment trends, he said.
“It’s only when we try to understand our clients’ values can we enrich their lives,” Stassopoulos concluded.
Very soft words based on an impressive ideology however it is not commercially relevant. The facts are that wherever there is digital advice or robo-advice or digital tools (and there has to be in 2020 to remain a practice) that the pricing drops and therefore more clients are required to achieve required revenue to meet operational costs of a practice.
Reality is reality – consumers are empowered via digital | voice ‘tools’ and revenue is the big fat elephant in the room NOT empathy. Every Financial Planner I know has empathy and rapport with their clients however clients don’t (and aren’t and won’t) pay for the required revenue for a Financial Planner to meet compliance requirements.