Will AI-Led Fintech Platforms Make Financial Consultants Irrelevant?
The financial services in India are evolving at a rapid pace. Fintech platforms can now do more than payments, wallets or just basic online transactions. They have now started to move into wealth management, insurance, stock broking, lending, and the financial planning and AI-based advisory.
This is handy for consumers. Open an account, start a SIP, buy insurance, compare funds, track returns and get basic financial guidance in minutes from a mobile app, all with a young investor..
But this change also creates a serious question:
What happens to the little guys and girls of the financial consulting industry, mutual fund distribution, insurance advisers, and wealth managers?
The worry is real. Many of the traditional consultants started off by relying on personal contacts, word of mouth, trust and local networking.
Today, they face stiff competition from the large digital platforms, which have the technology, data, marketing reach, lower cost and greater power.
So let’s face it, it makes sense to be afraid of: How will the number of advisors change in the future?
My view is simple. Financial consultants, of course, will not become extinct, but the conventional approach of financial consulting will prove hard to maintain.
The Real Problem Is Not AI. The Real Problem Is Lack of Upgradation.
The fear of AI and fintech platforms stealing their clients is widespread among many consultants. Yes, to a certain degree this is true. The basic advisory work will be transferred to digital platforms.
If the client’s requirement is to compare only mutual funds, insurance premiums, opening a demat account or starting a SIP, then they need not depend on a consultant any longer. These services have become available online, and are frequently more affordable and easier to use. Previously, there was an information disparity in favor of consultants.
Clients relied on them to be able to tell them what fund is doing well, what insurance policy is appropriate, or what investment they can choose from. Nowadays, most of this information is easily accessible at the click of a button on apps, websites and social media..
This means the advisor’s role has to change.
The only way that the future consultant can survive is when he says, this is a good fund, or this is a good policy. The future consultant should be able to justify the suitability of the product for a given person, family, goal and risk profile.
That is where the real value lies.
Why Small Financial Consultants May Face Pressure
- Digital platforms are cheaper and faster
Financial products are readily available on fintech platforms. Comparing and buying of mutual funds, insurance, loans, stock investments online is now possible. This puts pressure on consultant’s prices.
If the same product has an in-store price that’s lower, then you can expect that the client will ask a perfectly natural question:
“Why do I need to deal with an advisor?”
This is where many traditional consultants may struggle. Their role can be easily replaced if they do not play a real part in transactions.
- Young investors are more comfortable with apps
The new generation are familiar with apps, online dashboards, YouTube finance videos, AI tools and digital investment platforms.
They desire speed, transparency and control. They might not wish to call someone for every little investment choice. They wish to have everything on their phone.
This is a challenge for advisors who are still using phone calls, face-to-face conferences and paper forms and informal WhatsApp communication.
- Clients are becoming more aware
Today’s investors are asking better questions. They want to know about expense ratios, risk levels, commissions, direct plans, taxation, liquidity and performance.
This is a healthy development, but it also means advisors cannot give generic advice anymore.
A client may now ask:
“Do you suggest this because it is beneficial to me or for your commission?”
The question alone is evidence of the transformation of the advisory profession.
- Trust has to be earned again
There’s still a lot of trust in financial advisors. At the same time, however, commission-based selling has raised questions among some of the customers.
Advisors that are not transparent about charges, risks and alternatives may find themselves slowly losing clients to digital platforms. The future advisor must be open, more ethical and more professional.
Trust will not be gained from the previous relationships alone. It will be provided by clarity, honesty and constant service.
- Technology gap is becoming visible
Large platforms provide reports, alerts, portfolio tracking, tax summaries, goal calculators; reminders and instant service.
There are still a lot of small consultants working manually. Their experience can be strong but their service delivery might seem to be outdated.
This is not to say that they don’t know anything. It really means that they need to be equipped with better tools.
A poor advisor equipped with a good platform could find that an average advisor with quicker service and a better presentation will steal the business..
- Reach is limited
Small consultants typically develop via referrals.
They are restricted to local clients, family contacts, friends and known networks. The fintech platforms have a national footprint.
They are employing digital marketing, apps, influencers, social media and data-driven targeting. The competition is not the only issue. The issue is seeing.
\Youth may not be aware of the existence of a consultant if he/she is not found online.
Does This Mean Advisors Will Become Irrelevant?
No.
Herein lies the distinction between a transactional advisor and a trusted financial mentor.
The transactional advisor does nothing more than assist the client in purchasing a product.
The client receives the advantage of a trusted financial advisor who will guide them in making the right financial choices.
There is a big difference between the two.
AI can compare funds.
AI can suggest asset allocation.
AI can prepare a basic financial plan.
AI can show portfolio performance.
However, AI isn’t always good at comprehending the emotional aspect of cash.
Ideally, the client should understand in his or her own best interest to be concerned with equity in the long term, but be panicked by a drop in the market.
In addition to financial goals, the family may also have social responsibilities, medical uncertainty, pressure to educate their children, marriage costs, property or business cash-flow problems.
These issues can’t be addressed just with an application. This is where a good human advisor still comes in handy.
Where Human Consultants Still Have Strong Value
Financial consultants can stay very pertinent if they concentrate on regions where personal judgment and trust are essential.
They can help clients with:
- family financial planning
- retirement planning
- children’s education planning
- insurance need analysis
- tax-efficient investment planning
- emergency fund planning
- business-owner financial planning
- succession and inheritance discussions
- portfolio review and rebalancing
- claim support and documentation
- behaviour management during market volatility
- preventing wrong financial decisions
The primary benefit of the advisor in many instances is not the best return product. The true benefit is in ensuring the client maintains discipline and refrains from expensive blunders.
The Consultant Must Change the Conversation
The previous discussion was about: Sir, this fund is yielding good returns, you’re supposed to invest in it.
The new discussion should be:
“Let’s first understand your goals, income stability, family responsibility, risk comfort, time horizon, insurance cover, tax situation and liquidity needs – then, we will make a decision on what is suitable.”
This transformation is very significant. The one big change the advisor needs to make is from selling products to financial planning.
Clients are increasingly unlikely to be willing to pay for simple information, but they are more likely to be willing to pay for clarity, confidence and personalised advice.
What Small Consultants Should Do Now
The small consultant shouldn’t go against technology. They should use it. They can use AI and digital tools to write more comprehensive reports, give client summaries, remind clients, explain products, analyse portfolios and communicate more professionally.
They must also create a basic online outlook. This does not imply they need to be influencers themselves. However, they should be seen on LinkedIn, WhatsApp, YouTube or just simple educative posts.
They should also decide on a niche. While a small consultant may be unable to cater to all, he or she can find his niche serving a particular group, for instance, salaried professionals, doctors, teachers, women investors, young first-time investors, NRIs or senior citizens.
They will be able to stand out with specialisation.
The Future Is Not Advisor Versus AI
It’s not a matter of replacing all advisors with AI, it’s about a transformation. The future is about AI-powered advisors replacing non-updated traditional advisors.
A consultant that is technologically driven, is clear about what they do and communicate with their clients, understands and abides by regulations, and takes into consideration the goals of the client and establishes long-term trust will thrive.
Anyone who relies solely on old contacts, commissions and product pushing will likely have a lot of trouble.
A consultant who only depends on old contacts, commissions and product pushing will face serious difficulty.
Final View
AI-powered financial technology solutions can certainly cut the need for rudimentary financial intermediaries. They will enable transactions to be processed more easily, cheaply and quickly. They will also appeal to younger investors who are OK with a digital platform.
They will not take the place of good financial advisers, however. Indeed, with the increasing complexity of financial products and the overwhelming amount of information presented by many sources, the demand for sound advice could grow.
The role of the consultant will change from product seller to financial guide. The life-long advisor who is familiar with the client, their family, their behaviour, their fears, their goals and their long-term needs will stay relevant. In a nutshell:
While fintech platforms can take the place of transactional advisors, it’s not the same as having a trusted financial mentor. The era of consultants—trusting human touch meets digital intelligence—is the era of the future.