I recently Googled “year-end tax planning” and got back 91 million results. Talk about overwhelming! Clearly, people are thinking about this topic. But the question becomes: what do you do with this information? How can you know which article is right for you? Do you need to read all 91 million articles to finally figure out which one has the best advice for your unique situation?

This time of year there are an abundance of very useful tax tips and strategies for year-end. But here’s one you may not have heard. I recommend that you sit down with your advisor to look at the big picture and not just a set of uncorrelated tactics.

I know this advice might sound a little old-fashioned. Why have a conversation when you could just type in a search term and get all kinds of great advice? The problem is that the advice you get will not be customized to your unique situation, your family, your goals. The advice won’t come from someone who actually knows you and what you’re trying to accomplish. Technology is a great tool if you use it where it is best suited. But sometimes technology is not the answer, but a means to getting the answer. Here are my perspectives. 

profile picture for William E Thonn
"I'm really passionate about building an integrated plan for my clients. Taxes, retirement, investments, estate planning and so much more. I care about getting the details right."


Technology is a valuable tool

These days it seems like people have gone a little over the edge with technology. Don’t get me wrong. Technology is integral to our business and we use it every day. In fact, we are looking at several different types of technologies right now to serve our clients more effectively. Without technology, we would struggle mightily to support our clients. We’re as focused on technology as the next company.

But I think it’s important to acknowledge that technology is not the answer in and of itself. What do I mean?

Technology is great at running complex statistical analyses that can provide us with very useful information. For instance, we can run multiple Monte Carlo simulations to model different outcomes for our clients, depending on their priorities and risk tolerance.

Technology also offers the financial services industry and clients an efficient and cost-effective means for executing a strategy and re-balancing portfolios at critical moments. We use technology in this way to serve our clients efficiently.

Technology also allows us to serve multiple generations of the same family quite effectively. For instance, we serve some families with different types of investors within the family.

For example, often the grandparents, the creators of the original source of the wealth, will have conservative goals, seeking to preserve the wealth they’ve created. The second generation, the children, however, may be managing and building wealth and want to make sound investments with longer term returns.

But the third generation, the grandchildren, are often interested in growing their wealth more aggressively. They are willing to take more risks and want an aggressive portfolio that would be untenable for their grandparents.

Technology systems allow us to manage all of these portfolios individually and collectively track the progress of all three generations and refine the portfolios based on their different objectives. We can provide logins and account accesses to those who want to actively follow how their accounts are performing. Technology allows us to serve these types of clients very well.

But this is where some people have started to confuse using technology as a tool with seeing technology as the solution.


Why have a financial advisor?

A lot of people these days, particularly younger investors, have become acclimated to a certain way of life. They do their banking online, buy their groceries and household goods online and even make charitable donations online. All of these experiences are almost exclusively digital.

So why should they not handle their investments online as well? Why should they have a personal relationship with a financial advisor and what will this honestly do for them that an online experience cannot do?

This is understandable given the wealth of “information” that seems to accompany these online situations. For instance, anyone can setup an online investment account. They can then answer a few questions, very good questions even, about their situation.

Then a technology system will spit out a portfolio diversification strategy that fits the profile of how they’ve described themselves. Is this not enough to achieve someone’s financial goals?


The appeal of technology systems in financial advising

While there is a lot that technology can do for affluent families, it does have its limits. The limits are found, in fact, in the very source of the appeal of the technology systems. I have a sense that investors find these systems desirable for three primary reasons:

  • They give you control over your investments.
  • They are cool and cutting-edge.
  • They offer lower costs.

Let’s take each one of these one at a time and see how well they stack up against the reality of what I’ve witnessed after being in the industry for more than 30 years and what we see after serving thousands of affluent families.


The illusion of control

First, let’s talk about control. One of the first things I learned as a financial advisor is that control is illusory. I don’t control the markets. I don’t control the decisions of management at the companies I invest in. About the only thing I do control is my responses to the changing dynamics around me.

This is where technology systems reach their limit. While it appears that you can control your investments, which I question, this does not mean that the technology systems will automatically control the outcomes of your financial situation. Why do I say this?

The clients we serve face two very challenging situations. First, their financial lives are often quite complex. Second, many of our clients are time-starved and simply don’t have time to do everything that needs to be done. How do these two impact financial outcomes?

Let’s take the three most common changes in a young person’s life that usually take place in their 20s or early 30s: they get married, they buy a house and they have children. As soon as these three situations occur, time seems to fly by. Their lives get busier and busier.

But with these changes in their lives come the need for changes in their financial situation. They need more insurance. They need better tax planning. They need to create an estate plan. They may want to take a different perspective on their investments.

But the problem is that the technology systems don’t know these changes need to be made. More than that, as people get busier; they neglect to make changes to all of the areas where they should be putting strategies in place. But the key point is this.

Most people who are extremely busy, time-starved and facing complex financial situations don’t want to talk to a computer system. They want to talk to a real human being and explain the nuances of their situation. They then want that person to manage the details of all of the decisions they make so they can get back to living their lives. Technology systems alone just cannot do this.


The cool factor

Technology systems are cool. I love my iPhone. There is a certain breeziness to sitting down in front of a computer system, typing in answers to a survey and then getting a customized investment strategy. It’s very enticing. But does it work?

This is what I’ve learned after more than 30 years in the business. The success or failure of any financial plan will be determined by how it is structured at launch and how it is refined over time. Think about it this way.

Have you ever heard the saying “if you don’t know where you are going any road will take you there?” This is true whether you are driving a Ferrari or a Chevy. In my experience, good technology can be the Ferrari, but you need to know which road to take or you just get nowhere fast.

The same is true in financial planning. If you take the wrong road, or even less than the best road, you may never get on track. More importantly, you will never get the time back that you lost from moving in the wrong direction.

If you read the article from my colleague Craig Janus, A High School Fast-Food Job Might Contribute Over 2 Million Dollars To My Net Worth, you’ll see the importance of time in financial returns.


Lower costs

Technology systems promise lower costs than traditional fee-based relationships and on a stand-alone basis that may be true. But in our experience, there is nothing more expensive than failure. You see, investing is one part of financial success. But missing just one component of a comprehensive plan can undo the entire strategy. Why do I say this?

My colleague David Peckenpaugh recently wrote an article called Prepare Now For An Uncertain Future. He relates the story of how his daughter had an accident that resulted in a long stay in the hospital. This could have significantly damaged his financial standing were it not for the insurance that his financial advisor recommended.

You see, technology systems will never understand the complete range of financial concerns that impact your life and who you love. This is why we offer a wide range of services that deliver a comprehensive approach to managing and protecting your wealth.

Our clients tell us who they love and what they want to have happen with their wealth. We then create and execute a broad set of strategies that touch on: taxes, retirement, insurance, charitable giving, estate planning and, yes, investments. These all have to work together for you to achieve your financial goals.


Should we talk?

There is a lot of information out there. Technology can be a great resource to help organize the information and make sense of it all. But technology does have its limits.

At Whitnell we are committed to using technology in the best way possible to serve our clients well. But we are more committed to listening to our clients and creating and executing strategies that will help them achieve their financial goals.

If you don’t want to sort through 91 million articles on the internet and simply want to talk to someone who understands you and help you do everything that needs to be done, let’s have a conversation.


The information contained in this article is provided for informational purposes only. No illustration or content in it should be construed as a substitute for informed professional tax, legal, and/or financial advice.