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The Boomer

Can technology help boomers manage their finances?

By The BoomerFOXBusiness

 REUTERS/Kim Hong-Ji

Baby Boomers nearing or in retirement are looking for the level of technical sophistication they receive from their personal experienced financial advisor when planning their retirement goals.

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Digital advancement technology has become the new wave for operating models and advice delivery channels for asset and wealth managers.  Digital advancement has paved the way in retirement planning for their asset and wealth management.

Fox Business discussed with Michelle Brownstein, CFP, Vice President of Private Client Services at digital wealth management firm Personal Capital, an experienced financial planner, on how Boomers can learn to love technology that helps manage their finances.  Here is what you need to know. 

Boomer:  What are the benefits of wealth management technology and what are the fees you can expect to pay?

Bronwstein:  Without a doubt, transparency is one of the biggest benefits to wealth management technology. Not only does it help you see your full financial picture and better understand how you’re tracking against your financial goals, but it also pulls back the curtain to reveal all the fees you’re paying. “Wealth management technology” can mean a lot of things, but the transparency afforded by the most holistic, in-depth, easy-to-use tools is unmatched.  In my experience, transparency and technology help build trust and confidence.

From credit cards and checking accounts to employer-sponsored retirement accounts, college savings and mortgages, Americans have more financial obligations to manage than ever before. Thanks to technology, we also have an unprecedented ability to see all of these accounts in one place and understand how each impacts our overall financial picture.  The best part?  We can access all of this for free.

We did a study of Personal Capital users and found that just by signing up for the dashboard, they started saving an average of 15% more per month. Why? One theory is that it’s similar to buying a scale when you want to lose weight: if you step on the scale regularly and know where you’re at, you may be less likely to eat that second doughnut with your morning coffee.

On the flip side, wealth management technology can also help you read the fine print and spot fees you might not see. Is that actively-managed mutual fund charging you more than you thought? There are tools that can tell you exactly what kind of fees (administrative, trading or fund fees) you are paying for your retirement account. It’s important to catch these fees early, because they add up over time.

Digital wealth management is also much more cost-effective than the traditional broker model.  Recent research from Personal Capital explored what a number of popular advisors really charge for investment advice. It found that technology-enabled wealth managers charged much less than the brokerage firms, in some cases by a percentage point or more

Boomer:  How can this technology help current and soon-to-be retirees manage a chaotic financial life?

Brownstein:  At Personal Capital, we’ve found that the average affluent household has between 15-20 financial accounts spread across multiple institutions, which leads to chaos and inefficiency. Sorting through a frustrating mess of bills and envelopes – or toggling between websites – does not put investors in the right mindset to make smart decisions about their finances and retirement.

Instead of laying out all your bank statements, credit card balances and quarterly retirement fund reports on the coffee table and trying to make sense of it all manually, wealth management technology helps you see it all in one place.

One of the most confusing and important considerations for retirees and soon-to-be retirees is how to shift their allocations so they’re set up to successfully navigate income in retirement. This is a major change for most investors – both technically and mentally. Digital wealth management can remove some of the emotion and guesswork from the equation. As an example, Personal Capital’s Retirement Planner allows soon-to-be retirees to project their spending ability in retirement and show them the cost of living their portfolio can likely sustain through their retirement.  These insights can help investors make the right financial decisions to set themselves up for success.

Boomer:  How can technology empower financial advisers to help their Boomer clients more effectively?

Brownstein:  One of the biggest issues I’ve seen in the financial industry is advisors giving advice without understanding their clients’ full financial picture.

Technology is rightfully changing this. When I help my clients make important financial decisions, I want to make sure I know as much as possible about their financial situation, and that I can see all that information in one place. This allows advisors to see all the financial items – even ones they do not technically “manage” for a client, like a home or a mortgage. Having all of the pieces linked and updated in real time allows us to build financial plans that adapt with a client’s changing needs and lifestyle.

One of the key ways we use technology to help all our clients, including Baby Boomers, is to navigate changes in their financial situation. We regularly reach out to clients proactively when we feel a strategy change is needed. Importantly, the changes are not triggered by market events, since we never recommend market timing. As an example, if a client projects they will spend $7,500 per month in retirement and in reality is on pace to spend only $5,000 per month when they enter retirement, we will see this and likely recommend a slightly more conservative allocation as they do not need to take as much risk to support their spending need.

Also, if you’re someone who likes a high degree of your control over your own finances, even if you work with an advisor, wealth management technology can be a helpful bridge to keep you in the driver’s seat.  You don’t have to feel like you’re totally handing over the keys. If you work with multiple advisors, technology can help you see where they overlap and where they complement one another.