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Exciting … or intrusive? New tools will let advisers monitor client spending

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Whenever I pull out my wallet for another $8 deli sandwich, I shudder to think about the cumulative cost. Just two per week and I’m more than $800 poorer by the end of the year.

But what if there was an app on my phone that alerted my financial adviser when I’d reached a certain level of restaurant spending? What if the same app pinged him when I booked my family on one of those new flights to Cuba? At the very least, these updates could spark a conversation about how I was undermining my retirement investment plans, or college savings plans. I might become more mindful, and my adviser would have a better sense of what he had to work with.

This might sound farfetched, but the reality is closer than you may think.

Within 10 years, we’ll see “advisers with the ability to actually manage client’s finances in real time,” Financial Planning’s Managing Editor Suleman Din tells me. “Advice will be drawn and tested against thousands of sources of information.”

In his story on leveraging big data, “Thwarting clients’ self-destructive tendencies,”Din found that advisers are increasingly using digital tools to both reveal and change their clients’ spending habits.

“The nature of advice isn’t changing, but the fashion by which it will be conducted is,” he says. “You can now quantify the risk tolerance of your client — you can categorize their motivations, why they approach finances as they do. And then, you can back it all up with actual data, all in real time.” What’s more, judicious use of financial information can allow planners to “gain new value in a digital age,” Din tells me. Over time, “the attached cost for firms will fall further.”

Within 10 years, we’ll see “advisers with the ability to actually manage client’s finances in real time.” – Financial Planning Managing Editor Suleman Din.

While exciting, this could be intrusive. Even if it helps me in the long run, do I really want my adviser knowing that much about my deli visits? And what about the security of my information?

“With great power comes great responsibility,” Din says. “There’s a real danger that information can be stolen or misused, so advisers will have to be vigilant about the measures they take to safeguard it.”

Not all planners will be willing or even want to take on the responsibility. But even if they don’t go down the rabbit hole of tracking clients’ every purchase, advisers shouldn’t ignore how valuable these tools are in illuminating how, why and where their clients are spending, rather than saving.

“Advisers should become active users of data and behavioral finance techniques in their practice, if nothing more than to further their own value against the increased advance of robos, artificial intelligence and commoditized advice,” Din says.

It sounds as though I’d better plan that Cuba trip now.

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