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Why automated advice is like drinking Bud Light: Q&A with XYPN chief Alan Moore

ST. LOUIS — New technology can help financial planners offer more robust services, but won’t — common wisdom notwithstanding — allow them to serve significantly more clients, according to Alan Moore, CEO of XY Planning Network.

The number of relationships an advisor can realistically handle is — and will remain — finite: somewhere around 100 clients. But while technology won’t scale the number of clients, it can help broaden the depth of services advisors will provide, Moore says.

XYPN recently added a handful of new services to help growing RIAs stay on top of the latest planning trends. Most notably, access to coaching and consulting services and four CPAs to help advisors manage their clients at tax time, according to the network.

What’s the biggest trend you’ve seen in the industry?
We're moving away from being an industry and into becoming a profession. And you know, historically we all did investments — or insurance was at the center of the relationship or retirement planning was at the center of the relationship — because that's how we got paid. [Now] we’re seeing more and more consumers demanding fiduciary financial advice. I have 30-year-olds show up in our office and say, “I'm looking for a fiduciary.”
What’s behind the push toward financial planning?
The truth is the majority of consumers think they're financial advisors are fiduciaries. And yet the majority of advisors are not actually advisors. The industry is starting to recognize that, and it’s really fueled the growth of the financial planning movement. Advisors want to give financial advice. We want to be advisors. We don't want to sell products. We don't want to be conflicted. We want to be able to work in our client's best interest.
How is technology shaping advice?
No client ever came into the office because we were the world's best rebalancer. Those are the tasks that can be automated. But, clients are willing to pay for the part that they value — the relationship and the advice. We continue to see advisors moving up the value chain of financial planning. The industry started out with trading stocks and it moved into picking mutual funds. Now it’s about managing a diversified portfolio and becoming a real financial advisor. All the rest of that stuff got commoditized. But we're not losing advisors because of technology. Technology has absolutely commoditized all of these various components. It lets advisors keep moving up the value chain.
What is your take on the digital advice industry?
It's kind of like drinking Bud Light. No one is excited to have a Bud Light. But you drink it because it’s in mass quantity and available to a lot of people. That's awesome because it’s introducing people to beer — which may not be the way we wish we had gone, but it’s the way we all went. To me, these platforms are introducing people to financial planning. They're introducing them to the concepts.

Financial planners are more like a craft brewery. They have a very specific taste, a specific flavor or specific experience they’re trying to create for clients. The vast majority of beer drinkers might not like the popular craft brewery at the store, but beer from the brewery down the street is amazing. It’s all about personalization and bringing a very unique experience to clients.
What are the biggest benefits of technology?
The misconception is that technology is going to allow financial planners to serve significantly more clients. The number of relationships a person can have is somewhere around a hundred. That’s finite.

We're going to keep working with the same number of clients but two things are going to happen. Firstly, we're going to get more time back because we’re saving time with technology. Secondly, we're going to start providing more robust and more in-depth services to those clients. As advisors start to niche and become more focused, they're going to provide significantly more value to be able to charge significantly more to those same hundred clients.
What are the biggest dangers for independent advisors?
We don't have enough talent coming into the industry. The danger is the large-scale broker-dealers and wirehouses are churning and burning our talent.

The CFP Board is producing as many students as they can. It's not enough. And, the largest hirer of those students are firms who have 90% failure rates in the first two years because their sales organizations. So, for a lot of people their first introduction to financial services is really an unfortunate one. They don't even know RIAs exist.