MDRT Study: Should We Be Worried About Technology?

You’ll find lots of discussion these days centered on many of the recent technological changes in the life insurance and financial services businesses. Lots of people seem to agree that much of the change has been driven or accelerated by COVID. It’s hard to argue against that, but the Million Dollar Round Table has just released a study that explores what these rapid changes might mean for advisors, with a particular sensitivity to the concerns of advisors who may feel threatened by the potential rise of robo-advisors and other technologies.

In this study, the reactions of surveyed Americans show that 56% of Americans want their finances handled by a mix of people, robo‐advisors, and other technological tools. This majority includes 54% of human advisor clients, 50% of robo‐advisor users, and majorities of all age groups.

The study revealed what Americans saw as advantages to working with human advisors, including the opportunity to build trusting relationships (chosen by 66% of survey respondents), ease of communication (65%), and high levels of human interaction (49%). There were concerns about human advisors, though not as strong. The concerns that were expressed were about personal or financial security breaches (37%), the accuracy of financial assessments (35%), and human advisors’ response time (32%).

Robo‐advisors evoke stronger worries, as one might expect at this stage of their involvement in the market, with 51% of Americans expressing concern about personal or financial security breaches. Significant minorities of Americans also worry about minimal human interaction (42%) and hard‐to‐understand financial terminology (39%). Impressions of robo‐advisor advantages are considerably less enthusiastic than the human advisor advantages, as 44% of respondents cite the minimized risk of human error, with another 44% pointing to response time and 38% listing reduced costs.

“Many Americans clearly see human financial advisors and robo‐advisors as having complementary strengths and weaknesses,” said MDRT President Randy Scritchfield, CFP, LUTCF. “With the digitization of our profession only accelerating, advisors must learn to adapt in this new professional landscape.”

One important takeaway from the study, as mentioned in an MDRT news release highlighting the study, is that “to mollify concerns about their own fallibility, human advisors must effectively incorporate technology into their practices – and effectively communicate the technologies they use to their clients.”

As an example, the report points out that 75% of Americans say that it would be extremely or very important for a human advisor to use cybersecurity tools like password managers or two‐factor authentication. Only 35% of survey respondents with human advisors, however, reported their own advisor uses such tools.

In addition, as a seemingly permanent change to the way the business operates, brought about by the pandemic, 52% of Americans with human advisors expect to meet virtually with their advisor at least half of the time in 2022.

Social media is playing a role, too. According to the study, 68% of survey respondents reported learning about finance and investing through at least one social media platform. Facebook led the pack, with 37% of respondents saying they use it to learn about finance, followed by YouTube (35%), and Instagram (29%). Not surprisingly, the study shows stark differences among age groups: 90% of 18-to-29‐year‐olds say they learn about finance on social media, compared with 81% of 30-to-44‐year‐olds, 62% of 45-to-60‐year‐olds, and 42% of Americans over 60.

Younger people said they are more likely to use even newer social platforms to learn about finance. Significant shares of 18-to-29‐year‐olds say they learn about finance on TikTok (31%) and Discord (21%). Among 30-to-44‐year‐olds, 24% say they get financial information on Reddit.

“Many financial advisors are rightfully concerned about financial misinformation clients might see on social media,” says MDRT Second Vice President Greg Gagne, ChFC. “The answer is not necessarily to join TikTok and add your voice to the din. Instead, educating clients about financial misinformation and scams can increase their digital literacy and your own credibility as a financial advisor.”

Credibility is undoubtedly key. The savvy advisor will understand that more and more clients and prospects are using and will continue to use technology as a tool. But combined with the credibility that only the smart, client-focused human advisor can bring to the table, technology can be one more tool the credible advisor can use to solve client problems.

Charles K. Hirsch, CLU, is the president of Hirsch Communications Consulting, LLC, a communications consulting operation in Florissant, MO. For many years, Chuck was the editor and publisher of Life Insurance Selling magazine and has published several of the leading life insurance industry magazines. He continues to contribute articles on a regular basis to industry publications, in addition to providing a wide range of writing, editing, content development, and marketing services through his firm. He is a regular contributor to NAILBA Now e-Newsletter as well as to Perspectives magazine.