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WealthTech Insights #74 with Joe Elsasser. The Future of Financial Advisors Is Technology Augmented

Based on an interview with Joe Elsasser, CFP®
President and Founder of Covisum®

In the next five to ten years, the role of the financial advisor—the human advisor—is going to be more and more technology augmented. This is the central idea in a speech given by Joe Elsasser, CFP®, President and Founder of Covisum®. In the past, we told software what to do and then software did it for us. As time moves forward, however, software tells us what to do and we interpret, explain, and hold clients’ hands to show them why they should do it. In this article, we will discuss if advisors need such a shift and how WealthTech solutions can make such a future become reality.

“We’re going to have more and more questions answered in a prescriptive way by software. I think that shift is already happening.”

Transition to prescriptive software

We hear from many experts that the role of financial advisor is shifting from merely investment advisor or wealth manager to financial planner. Joe says that it’s going to be an advisory job to quantify or demonstrate why software-provided answers are better for clients. He supposes that this transition will happen in the next couple of years.

“Advisors should recognize that, frankly, software is able to consider more variables than a human can and it’s probably able to deliver better solutions than a human can.”

According to Joe, the Social Security Timing® software that he launched almost ten years ago is a great example of this shift. He was looking for a Social Security optimizer to empower his own financial planning practice, but he couldn’t find any adequate solutions on the market. To rectify this, he joined forces with a college friend to build Social Security Timing, which later grew to become Covisum’s first product. Similarly, tools should empower advisors—advisors should not empower software.

The importance of being focused

Building a system able to provide enhanced insights requires significant effort and time, so it’s incredibly important for both financial advisors and fintech firms to have a niche—however, Joe says that most advisors and financial planning software firms don’t have a niche.

“Over the next decade the shift to niching fintech software companies will become more and more pronounced to deliver better answers when you’re talking to a single or a cohesive audience.”

Joe is sure that success doesn’t depend on what niche one chooses. At Covisum, for example, he chose to focus on the niche of customers close to retirement; Covisum intentionally left millennials out of its focus because millennials have a whole different set of questions. Of course, if another company that served millennials became successful, this would not contradict the point.

“I think there’s a huge value in fintech companies that decide to niche their business in that direction. I don’t see a lot of great options out there today in any of those niches for advisors.”

One more reason to stick to the chosen line is time. In fintech, one faces more than one hundred new opportunities every day and is forced to pursue the opportunities most closely aligned with the company.

“Maybe I’m an optimist at heart, but I always believe there are more opportunities than there is time in the day. Focusing on the most important opportunities is always going to be the central challenge of the business.”

Takeaways

The role of financial advisors is imminently changing, and so is the software. It’s crucial to make advisors’ lives easier and help them make better decisions for their clients. No matter what niche you choose, it’s important to focus on what you do best and keep improving the clients’ experience.

About Joe Elsasser, CFP®

Joe Elsasser, CovisumJoe developed Social Security Timing® in 2010 because, as a practicing financial advisor, he couldn’t find a Social Security tool that would help his clients make the best decision about when to elect their benefits. Inspired by the success of Social Security Timing, Joe founded Covisum®, a financial tech company focused on creating a shared vision throughout the financial planning process.

In 2016, Covisum introduced Tax Clarity®, which helps financial advisors show their clients the hidden effective marginal income tax rates that can significantly impact cash flow in retirement. In early 2017, Covisum acquired SmartRisk™, software that allows advisors to model “what-if” scenarios with account positions and align a client’s risk tolerance with their portfolio risk. In January of 2019, Covisum launched Income InSight®, an income planning tool that deeply integrates with Covisum’s other tools and helps advisors make better financial decisions, faster, while resolving conflicts in assumptions and conflicts in results that plague other financial planning tools.

Covisum powers some of the nation’s largest financial planning institutions and serves more than 20,000 financial advisors.

Based in Omaha, Nebraska, Joe co-authored “Social Security Essentials: Smart Ways to Help Boost Your Retirement Income,” is a regular speaker at industry events and is frequently interviewed by trade and national media.

 

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Interviewed by Vasyl Soloshchuk, CEO and co-owner at INSART, FinTech engineering company. Vasyl is also the author of WealthTech Club, which conducts research into Fortune and Startup Robo-advisor and Wealth Management companies in terms of the technology ecosystem.

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