How to prepare for the hybrid DIY future

In the future, advisors will need to focus more on complex planning and less on simple product advice because do-it-yourself (DIY) investing is here to stay.

The wealth management industry is in a “hybrid situation,” where some clients have DIY accounts but are also using a human advisor, said Tim Prescott, senior vice-president and head of asset management with Aviso Wealth. Prescott was speaking last week on a “Future of Advice” panel at the Investment Funds Institute of Canada’s (IFIC) annual leadership conference in Toronto.

Fellow panelist Michael Walker, vice-president and head, mutual funds distribution at RBC Financial Planning, said there’s still a “significant role” for humans in financial advice, especially during market “gyrations” like investors are experiencing this year.

“When there are major life events — regardless of age — even younger savers and investors want to talk to a human being,” Walker said.

Human advisors will need to focus on “more complex planning” advice — such as retirement income planning and estate planning — while digitization can provide product-oriented and asset allocation advice, he said. “Let digital do what digital is good at and let humans do what humans are good at.”

Almost half of mutual fund buyers have purchased investments on their own without an advisor, according to the 17th annual Canadian Mutual Fund and ETF Investor Survey, released by IFIC and Pollara Strategic Insights on Oct. 3.

Investors have DIY accounts for some (but not all) of their investments because the DIY tools are easy to use, said panelist Susan Silma, head of risk and regulatory business practices with Sun Life Distributors.

“My experience tells me that human beings don’t trust themselves to put all of their eggs in that DIY basket. It takes time and energy, so even if the tools are easy, an advisor who understands the dynamics, who can support good savings habits, who can keep people from doing knee-jerk bad things in volatile times is really valued,” Silma said.

It’s the older clients — and those with higher net worth — who tend to value advice, Silma said, adding one challenge for the industry is to address the “other demographics”: younger people who do not (yet) have high net worth.

The old approach, Prescott said, was to deliver a financial plan to as many clients as possible. “But quite frankly, the $7,000 account doesn’t need the same type of advice as the $700,000 account, notwithstanding that they might in the future,” he said.