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Balancing high-tech and high-touch

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We all know them. We envy them. We may even secretly despise them.

They are the people who have it all figured out. They know exactly how much to put aside for their retirement. They pick the right mix of programmes and investments for their short- and long-term needs. They understand the breadth of programmes their employers offer and have discovered the right way to use them to their advantage.

They are rare.

The rest of us could use some help. Maybe even a lot of help. We need guidance to make those right decisions. To use those programmes to our maximum benefit. Frankly, to help make sense of all the information, data, and choice that is out there.

A lot to make sense of

The vehicles to a fiscally fit future have grown increasingly complex through the years – defined benefit pension schemes shifting to more do-it-yourself defined contribution pensions. Lifetime ISAs and Help to Buy ISAs introduced as shorter time horizon vehicles. Private health insurance offered to provide improved access options over the NHS.

Add in the complexities of life assurance, income protection, mortgages, payday loans, credit cards and student loans and the decision making gets daunting.

If we can figure out how to choose and use these programmes to best meet our needs for the short and long haul, we’re going to thrive in our health and in our wealth. We’ll be less stressed about our finances. We won’t spend as much time worrying if we’re on the right track to retire when we want. We’ll be more productive at work and we’ll cost our employers less in health-related absence.

It’s a win-win for individuals and employers. Employers can deliver on their end of the social contract if they can help make this reality. But how can employers make it real?

Fortunately, technology can come to the rescue – to a point.

A good place to start

Decision support tools can help individuals determine what they need rationally. Being sensitive to GDPR, tools driven by personal data can span the spectrum of employer schemes, personal holdings and even “people-like-me” scenarios to establish that optimal, logical mix of programme selection and utilisation.

The best of these decision support tools consider an individual’s entire picture. They look beyond the narrowly defined trade-offs of whether to put money into that Lifetime ISA or the Help to Buy ISA, or when to choose a fixed rate mortgage over a variable. Instead they assess the entire spectrum to determine when it’s advantageous to pay off debt, when to use the pre-tax and employer match benefits of a pension, when to invest in an employer’s share schemes, how to build an emergency fund, and so on.

Artificial intelligence tools, driven by machine learning, are emerging that can automate the entire process for the individual. They can even recalibrate based on market adjustments, regulatory changes and financial changes in our data. Automated nudges can keep the individual involved and aware, but only to the extent needed.

Behavioural science tells us that people are more likely to “set and forget,” so making it easy to overcome the initial inertia is critical.

Employers can help with this technical starting point. They have access to current and historic programme participation, including data that’s often difficult to access around compensation, share schemes and incentives.

To make it simple for the majority, employers can make this data readily and securely accessible, populated into algorithms that also assess “people like me” data to create an unbiased, objective look at the options available based on the known data.

The human touch

The missing link, though, is the subjective side. So much is going on in our lives that trade-offs, preferences and genuine thought needs to be part of the overall equation. Algorithms can only go so far in capturing all the scenarios going on in our minds and in our lives.

A balance of high tech and high touch is the answer.

Employers can provide this balance objectively by adding the personal touch of independent financial advisors. IFAs armed with this aggregation and stochastic AI analysis can take that extra step of getting to know the individual and their household needs, their risk tolerance and their plans. Financial planning scenarios can be further refined for a truly bespoke approach.

In a fee-for-service IFA model funded by the employer, individuals can be further assured that advice is based on what’s best for the individual, not based on a commission.

Balancing high tech capabilities with the intangible of high touch can get us to that simplicity we crave, with clear benefit to us and our employers.

Oh, and those people who’ve invested all that time and energy to figure it all out for themselves – maybe they’ll be envying us.

 

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