The Future of Financial Planning
Over the years, I’ve used this forum to talk about general financial concepts – saving early and often, investing for the long term, and time in the market versus timing the market. Looking back at all I’ve learned and shared, I’ve realized the equal importance of looking forward. What will the future bring to your financial plans in terms of retirement, investments and security?
I had the opportunity to hear a speaker at an industry conference talk about exponential finance and the disruption that can occur as a result of the expanding growth of technology. How the changes will be exponential can be illustrated as follows:
Say you have a calendar. You place one grain of wheat on the first day and continuously double it each day thereafter. So, you have two grains on the second day, four grains on day three, eight grains on day four, etc.
Until you get later in the month, you don’t have a lot of wheat. Then, suddenly, you have a huge amount of wheat. The same can be said for the impact technology has on our lives. When it comes to integrating technology into our lives, especially with the rise of digital technology, some say, we’re around day 26, and that as a society, we’re on the cusp of dramatic changes. Technology will be changing at an ever-increasing rate.
Are we prepared for that? How might our financial lives change?
Sensor Technology and Artificial Intelligence (AI)
The Waymo self-driving car from Alphabet has already arrived. While you might question the concept, don’t brush it aside too quickly. A little more than a century ago, horseless carriages frightened animals on the roads, a development quickly followed by tanks and airplanes on the battlefield.
The innovation doesn’t consist of the self-driving car, though – it refers to sensor technology. Via sensors, the vehicle can detect its environment and make adjustments and decisions. This sensor technology could be applied to walls that will know when you walk into a room and automatically adjust the light and temperature. Refrigerators could be equipped with sensors that know food has spoiled and automatically reorder the item. We could wear a small “tattoo sensor” that would detect a change in a medical condition and automatically administer medication.
And as machines sense and make decisions, they’ll begin to build a library of intelligence. We already see that in medicine – and even my phone’s weather app is “powered by Watson,” IBM’s AI.
Financial Planning Impacts
Where else might the technology lead? Researchers look to single-cell-sized robots to destroy cancer cells or continuously monitor (and repair) our health. 3D-printing technology may be able to print a new organ or critical body part. These could lead to increases in longevity. Retirement is a 20th-century invention. What if you could live, active and healthy, well into your 120s or beyond?
Would you retire at 65? Could you retire at 65? Would a conservative retirement portfolio last, not just today’s 30-year retirement, but a 60-year retirement horizon? And what would your 60- to 80-year career look like? Would it be continuous? Or would you retool, switch careers, take a sabbatical, adapt again and come back to a different career or lifestyle?
How will financial planners adapt? It will definitely be a paradigm shift. There may be need for more of a “life coach,” helping with the financial aspects and choices of an ever-longer working career. Consider how the internet already disrupts the financial services industry. High-powered computing currently powers the investment advice behind some of the online robo-advisers. We’re searching for a home by clicking on Zillow, and let’s not forget the rapid increase in online mortgages and banking.
These changes could lead to changes in our plans for the future. The changes could also provide a powerful driver for global growth and wealth. Ethics and social needs will require attention, too. Just because technology can do something doesn’t imply we should do something.
The Power: Still in the Plan
Another one of my favorite axioms: “Mediocre execution will beat a perfect plan any day.” Generals long ago recognized many plans had to be abandoned once the real battle started.
You will still find value in setting goals and developing a plan to reach those goals. But there also needs to be a “repeat button,” so the plan continuously evolves and refines as circumstances change. Planning for your future can help you not only survive, but also thrive in any scenario – regardless of what tomorrow brings. Welcome to a brave new world.