The recent rise (and subsequent decline) of robo-advisors has generated much discussion about the threat (or lack thereof) that technology poses to human advisors. Yet, as discussed previously on this blog, the man vs. machine framing of the role that technology will play in the future of delivering financial planning advice may be too narrow. Instead, the combination of man and machine (i.e., the “cyborg advisor”) may pose the greatest opportunity to human advisors in the long run… and threat to those who lag behind.
In this guest post, Derek Tharp – our Research Associate at Kitces.com, and a Ph.D. candidate in the financial planning program at Kansas State University – examines how the game of ‘cyborg chess’ provides support for the idea that human-computer teams will remain superior to either humans or computers on their own (even when the intelligence of computers vastly outweighs that of humans), as well as some of the insights cyborg chess can provide about how the skills of cyborg advisors will differ from the traditional skills of advisors today.
‘Cyborg chess’ (or freestyle chess) is a version of chess in which humans can use any resources they want to improve their play… including today’s increasingly-sophisticated computer chess software. One interesting fact about of cyborg chess, as was previously noted by Tyler Cowen in his book Average is Over, is that human-computer duos consistently defeat both the best humans and the best computers. What’s even more interesting, though, is that the humans in some of the world’s best human-computer duos aren’t even all that great at chess themselves! Which means the skills that let humans most effectively assist and execute chess software may be different than the knowledge needed to be a great chess player!
In fact, it turns out that to be skilled at cyborg chess, humans have to be good at letting computers do what they do best, and then excel in areas where humans are more effective. And while there are some obvious applications to financial planning, in areas such empathy and building client relationships (where humans will certainly remain relevant in the future), the same is even true in technical areas of financial planning as well, where computers are typically thought to have an advantage over humans. Specifically, humans can play an important role in areas such as helping computers know where to look for the best solutions, examining inconsistencies generated by different computer programs, helping computers to be more efficient in their calculations and analyses, and knowing the limitations of various programs and when they may generate recommendations that don’t align with the real world. And of course, as technology becomes even more prevalent in financial planning, “finology”-focused soft skills and human aspects of giving financial advice will become increasingly important.
The bottom line, though, is simply to recognize that despite the view that computers will come to dominate certain areas within financial planning, the reality is that there are still ways that computer-human duos can be more effective than computers or humans alone. Additionally, this has some profound implications for the skills and knowledge that are needed to be a great financial advisor in the future, and those skills and knowledge may not necessarily align with what we think of (and currently teach under the CFP Board’s curriculum!) as the core competencies of great financial advisors today!