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How Technology is Transforming Advice

In 1964, Marshall McLuhan prophetically coined the phrase “the medium is the message.” What he meant was that the manner by which we communicate information has a more profound impact on the person receiving it than the information itself. Even if the same message is being communicated, the content is transformed by the medium used to deliver it.

As a modern example of how a medium can reshape the nature of content, consider how Twitter works. An avid user needs to adjust the way she thinks about the use of language to fit the character limit. It ends up having a direct impact on her vocabulary and grammar. As a result, the message being conveyed is transformed by the medium. 

In addressing specific mediums prevalent during his time, McLuhan said radio was more suited to packages or completed products. He contrasted this with television which, he argued, was concerned with processes and seeing how things were done. 

Consider, for example, a disputed pass play in a football game. If you’re watching it on TV, you want to watch the replay several times to see if the receiver actually caught the ball and got his feet down in bounds. If you’re listening on the radio, you just want the announcers to tell you if it’s a catch. With television, process is paramount. With radio, process is incidental. 

The printed word is like radio - it works best as a completed product. Therefore, the problem with delivering advice via bound copies is the medium itself conveys a sort of finality; a finished product. 

No matter how many times you tell a client that planning is a process and not an event, the bound plan in their hands will be shaping their perception to the contrary. So, if McLuhan was right that the medium is the message, then in the case of printed and bound financial plans, the medium is the wrong message. Why? Because, as any experienced advisor will note, planning is never finished.  

Smartphones and tablets are more like television in that they are oriented around a process more than a finished product. They encourage active, two-way engagement rather than a one-way download characteristic of the written word. This is actually a good thing for communicating financial advice, since true financial planning is a fluid, ongoing process. 

Of course, to really take advantage of the medium, the content should be adapted accordingly. Just giving clients a PDF of their plan to view on a tablet is effectively no better than a bound paper copy. The real problem is the missed opportunity and what the implications of that could be. 

Imagine a client who has a large concentrated position in his employer stock and is nearing retirement. He’s reluctant to sell any company stock at this point mainly because he’s got a certain price stuck in his head. He’s transfixed on $80 per share, which is where the stock was trading back in 2014, and is waiting for it to reach that level again (currently it’s trading around $65/share).   

His old school advisor explains to him that he doesn’t need to take the risk. He informs his client, “You are already in good shape to meet your financial goals based on the value of your current assets. Sell the stock and diversify to take some risk off the table.”  While he’s saying this, he’s walking through a bound copy of the plan which includes a retirement projection and some typical allocation pie charts which emphasize the overweighted slice.   

The client does not take this advice – insisting instead that he wants to hold the stock until it “recovers” to its former high.  Soon thereafter, the company has some negative headlines and the stock price falls below $45, jeopardizing his financial security.

Now, let’s consider what it could look like if the advisor adapted to the digital medium in this situation. 

The advisor decides to do some collaborative planning with the client.  He pulls up the client’s plan on a screen in front of them and suggests running different ‘what-if’ scenarios based on historical price changes in the stock price. Since the client is “anchoring” on the $80 price, they decide to run a scenario showing how much more money he will have in that case.

The advisor then says that – to be fair – if they are going to consider a high water mark, they should also look at the stock’s low point over the same time period (which was $47/share). They run the plan assuming the stock is trading at this lower price and numbers no longer work; he can’t meet his goals. 

This exercise helps the client overcome his anchoring bias by prioritizing his own aversion to loss in this situation. He decides to heed his advisor’s recommendation to begin systematically selling the stock and diversifying the proceeds.

The countless articles about digital advice almost all miss the larger point. This is not ultimately about streamlining operations or gaining efficiency. What’s at stake is the nature of advice itself. No discussion of financial advice should be divorced from the mediums by which the advice is delivered and the character of those mediums. 

Think about what is happening when you view online video or use mobile apps. You are close up to the screen and transfixed. The screen is small – often the size of a phone – and your hand is nearly always on the mouse or the screen. That invites different kinds of engagement such as the ease at which you can scan through a video or pause it and replay it. It’s interactive. It moves and flows. It responds. 

Holistic planning is also fluid and needs to adapt to changes. As advisors, we should embrace a medium that reflects that type of fluidity and bid farewell to the days of linear, stale plans that sit on shelves gathering dust.