It would be a mistake to ignore the fact that technology is having a profound impact on the way that we live our lives. One of the most important sectors that technology has fundamentally changed is that of investing. At one time, making a financial investment would take hours of your time, a meeting with an advisor, and arduous research through financial papers. Now, all you need is a device and the internet. Moelis & Company Managing Director, Lawrence Chu, has also seen the urgency for financial advisors to adapt to technological advancements to stay ahead in the industry. “It has been important to embrace change and use these new found capabilities to hone one’s advice; making sure you and your thought process are ever dynamic,” Chu said.
In the investment field of 2019, technology is the true equalizer. Technology is also what has turned investing from a battlefield into an absolute bloodbath. Technological advancements have become the great disruptors of every sector. Programs like Uber have upset the entire transportation industry. Applications like Robinhood has made trading and investing in stocks as easy as tapping a button. It is obvious, at this point, that things are changing forever. Adam Sarhan is the CEO of 50 Park Investment and an astute observer of how technology has changed the investment world. Sarhan says, “Advisors who embrace technology have the upper hand because it gives them an edge when they advise their clients.” Sarhan is absolutely right, but that same edge exists even with the advisor cut away from the conversation.
When we speak of technology, we are talking about rather vague terms. For the sake of specificity, we should clarify that what we are really talking about is data aggregation. Data is the all-encompassing tool that every investor needs on their side and now, more than ever before, it is available to them. Data aggregation has now become an automated process that can be accessed by anyone, anywhere, at any time. Gone are the delays between data transference and data delivery. Now, we are living in a fully automated world. Newer technology is paving the way for people to make engaged, informative, and sound investments. This is a far cry from the way the process worked even just fifteen to twenty years ago. In today’s digital age, more and more financial institutions are being urged to embrace this technological evolution so that they can stay competitive in the rapidly changing world.
We are also seeing advisors finding ways to more accurately represent their clients. In the traditional investment firm model, a client and an advisor would meet for several hours. During this meeting, the two parties would discuss goals, finances, potential solutions, and spending habits. Nowadays, investment firms can port this data into an application where they can quickly calculate the answers to those very same topics. “The largest impact on my business of advising CEOs and Boards on complex transactions and strategic matters has been the significant increase in speed of data/information, communication and its impact on decision making,” said Lawrence Chu.
Firms need to start looking at technology as a sound investment rather than an expense. Technology can do far more than pull in data for consumption. Technology can also provide a collaborative path forward for firms to communicate with clients, create paths, establish goals, and encourage investors. Studies consistently show that technologically based firms are routinely outperforming the conventional advisor by a margin of about 5% in overall earnings. Those kinds of numbers simply cannot be ignored.
What makes investing particularly interesting in today’s digital climate is the fact that it mirrors how we operate as people. If you take a moment to take stock of your routine, you’ll find yourself tied to the internet in a variety of different ways. When you want to go shopping, you head online instead of the local retail store. When you want to book airfare, you go online instead of to a travel agent. When you want to get a ride somewhere, you pull out your phone and call Uber or Lyft. The very way that we operate within our social world has changed, so it makes complete sense that the financial world would mimic it.