Money

Pefin vs. Human Advisors? – Catherine Flax – Medium

I was asked recently, “how do you know that Pefin’s advice is better than a human advisor”? This is a very appropriate question that should be asked across all the places in our lives where the line between humans and machines continues to shift. The more that AI and robotics move into the disciplines formerly reserved for humans — in medicine, law, transportation, financial services and so many more facets of our existence — understanding whether the service we are receiving is improved, is important. How do we really know?

Here are a few thoughts on this topic:

1) “Human Financial Advisors” are not one group dispensing the same advice. If you were to speak with 100 human advisors you would likely get 100 different financial plans. That doesn’t mean that there are 99 “incorrect” plans and 1 “correct” plan- it is, to some extent, a matter of what works best in the context of your life, and the perspective of the advisor. Having said that, there are a number of things to look for within the advice to make sure that it is as good as it can be given the assumptions made- and this is true whether it is a human or a digital platform:

a) Are there conflicts of interest? Is the person or platform giving advice making money because they have succeeded in talking you into doing something — investing in that ETF, or buying that insurance? If so, proceed with caution because human nature being what it is, the people involved are likely to seek to follow the incentives- meaning you should be skeptical about the advice. Remember that it is humans who write the code underlying digital platforms so being digital doesn’t remove the conflict. What does remove the conflict is having the compensation for the advice be independent of what the advice is. That is why Pefin is a subscription service- and conflict free!

b) Is there bias? Are you comfortable that the advice you are getting is objective and based on the facts of your circumstance, rather than the inferences someone is making about you based on generalizations about your demographic. Humans have inherent bias — and they can create platforms that are also biased. If a platform has been created from the ground up with the framework of being unbiased by design, you can be more confident that you are getting the best advice for you. Pefin is unbiased by design.

c) Is the person or platform giving you the advice qualified to do so? Pefin was created by people with decades and decades of experience as financial services professionals. Many fintech companies have a lot of tech experience (and we do too!) but are light on understanding what is most important in providing world class fiduciary advice. Unfortunately with human advisors there is a very broad range of quality- and it can be hard to detect if yours is a good one until it is too late.

d) Is it continuously updating? Pefin analyzes up to 5 million data points for each individual user and updates in real time when your life changes, the world changes, the markets and economy changes- making sure that you have the most current information about your financial situation, at your fingertips.

2) For most people, the comparison of human vs digital platform is a moot question. At $5,000 for a financial plan or $100,000 required for assets under management (which is typical) financial advice is out of reach for most people. The right comparison is whether having a financial plan is better than not having a financial plan — and in that case the answer is clear. In this article the fact that 50% of Americans don’t have financial plans is highlighted — and that means that half the population is effectively on a journey without a map.

3) There are additional things to consider about dealing with a human vs a machine beyond affordability, lack of bias and being able to eliminate conflicts of interest:

a) It has been well established that the #1 topic people are uncomfortable discussing is money. More than sex, money is the “taboo subject” — so speaking to a human advisor can become awkward for many people. Being able to interface with Pefin- with no human being ever seeing your prior financial missteps- is very comforting for many people.

b) The times when people want to examine their finances or play with various scenarios of future decisions may not be in their semi-annual meeting with their financial advisor. It may be at 2:00 am when insomnia hits and the burning questions of life are most poignant. As we said in this somewhat cheeky video– Pefin is there for you at any time of the day or night, when you want to interact.

c) It doesn’t have to be “either/or” — for plenty of people the relationship they have with their human advisor is one that is built on years of trust. Having a second opinion or another perspective is something that Pefin can provide at little cost — but delivers great fodder for an even more in-depth discussion. At Pefin, we believe that there is no “one size fits all” — for some people with very complex needs, or the desire to “talk it out”, having a human advisor alongside the transparency of a digital platform can be a real plus!

d) Back testing is far easier with machines than with humans- being able to validate the quality of the advice being given -because every interaction is quite literally “on the record” is possible with a digital platform in a way that it is not with humans. There are no “side bar” discussions with a digital platform, and whether it is for the benefit of regulators or customers, the auditability of the advice from a digital platform is pure. At Pefin we can objectively test how we are doing, and are continuously improving to bring the highest quality advice to our users.

Pefin — the world’s first financial advisor, brings unprecedented value to users of all ages and stages of life — people who are financially savvy who want another perspective and a comprehensive analysis of their complicated financial life, or those individuals just starting out and learning how to put the pieces together. Whether planning for a new baby, or for retirement, Pefin can provide perspective that is difficult to get from any other place — and it is available 24/7.

Ultimately we know that what people care about isn’t the money, it is achieving what matters most to them. At Pefin we are committed to helping everyone #DoLife, by delivering the very best financial planning and advice possible!


Source link
Show More

Leave a Reply

Your email address will not be published. Required fields are marked *

Close