What financial advisors should be saying about financial apps
The level of trust we have for apps in the modern world is virtually unprecedented. We even trust apps with our money. Which is why it probably doesn’t come as a surprise that people, especially young people entering the workforce, are turning to their phones for financial advice in rapidly increasing numbers.
There are hundreds of financial planning apps for download in the app store, with more developing every day. A portion of these apps are backed by highly credible sources, and offer a wealth of resources to help those who grew up in the digital age navigate the financial world in a way that feels most comfortable.
So, what’s the problem?
No two people are alike
Everyone has different goals, concerns, and expectations when it comes to financial planning. While most apps require users to complete a series of questions to better understand their situation, an app is kind of a “one size fits all” approach—it doesn’t always consider where a person has been financially, only where they want to end up.
A clear benefit of a financial advisor is that they can take a deep dive into someone’s financial past (for better or for worse) and shape realistic expectations based on their extensive knowledge of the market.
How safe are they, really?
App developers are designing with security as a top priority, there’s no doubt about that. However, as smart as the developers may be, there are people as equally adept with technology who are fully capable of gaining access to your most critical information.
Even if you haven’t entered your banking information into the app, it’s completely possible for a third party to gain enough access to do some damage. The majority of the top financial advising firms have been dealing with this type of sensitive information for years, if not decades, and have experience keeping it safe.
Don’t keep it all in one place
A lot of people think a one-stop-shop for financial planning sounds like a dream, and, while convenient, this could also pose a major threat. Thousands of cell phones get lost or stolen every day, and that means the risk for compromised financial information is high. Sure, a financial institution could get hacked just the same, but, at the very least, the firm should have procedures in place to keep account information locked and prevent any further damage. When a phone is lost, there is very little that can be done to get that information back.
Managing finances can still be confusing
For the untrained eye, analyzing financial information can be extremely confusing, even with an app. Though they are designed to make financial planning a breeze, a lot of users might still have questions regarding the best places to put their money and, most importantly, why.
An app that automatically makes financial decisions without the user having to think twice is setting them up for confusion down the road. Financial advisors are trained to explain the benefit of certain decisions, whereas, once an app is given permission from the user, may make important investment or budgeting decisions without reason.
Though there is no reason for dedicated users of financial planning apps to jump ship, these apps should be looked at more as a supplement for professional advice, not a replacement. At the same time, financial advisors would be wise to familiarize themselves with the top online finance tools to relate to clients, and stress the importance of their professional services.