By Scott Miller
Over the last few years, Licensees have been making an effort to adopt technology to assist their financial planners in delivering advice more efficiently and affordably without compromising their compliance standards. Yet, the challenge is reaching a balance between reducing time, cost and efficiency.
The Psychology of Sunken Cost Fallacy
Assistant Professor of Marketing Carnegie Mellon's Tepper School of Business, Christopher Olivola defines “Sunken Cost Fallacy" as “the general tendency for people to continue an endeavour, or continue consuming or pursuing an option, if they've invested time or money or some resource in it".
This is something that we have seen with the way businesses approach their technology decisions. Instead of continuing to recoup sunken costs in inefficient technologies, businesses need to evaluate and understand what their overall outcome is with their chosen technology, and whether or not it can be replaced or enhanced with newer technologies that are more agile and built to withstand the next decade of compliance changes.
Reallocating Resource for a More Efficient Advice Creation Process
As technologies become more efficient, the manual nature of advice creation will become automated, particularly around document generation. With the rate of innovation in financial planning technology, next day, personalised and comprehensive advice is possible.
So, what happens to the Human Resources that businesses have invested in? Well, it's not an entirely wasted investment as these administrative and Paraplanning team members can be reallocated and upskilled to be strategy specialists who assist financial planners in their research and development of financial strategies, rather than document generation.
To revitalise the financial planning industry and grow the number of financial planners in Australia, change must come from the top.
Newly established Licensees are creating a fully integrated technology infrastructure from which Advice Creation is entirely technology driven to reduce the cost of advice and increase the accessibility to deliver advice to more Australians.
Large Licensees need to find a balance between providing flexibility and freedom like a small Licensee but with the support and technology infrastructure of a large Licensee. After all, financial planners look to their Licensee for guidance and approval for technology solutions.