Every year, more and more people incorporate technology into their financial lives. According to a recent report from consulting firm EY, 1 in 7 digitally active consumers were using financial technology solutions in 2015. That number is now 1 in 3.
That’s welcome news, according to Jennifer Capouya, head of SunTrust Bank’s digital investing group. Why? Because digital tools are making people financially savvier and giving them a better overall picture of their money-related lives.
“It brings a level of transparency into people’s personal finances, and it’s convenient,” she said. “You can get a better handle on your monthly spending and on your income and what it takes to achieve a goal. It’s a big game changer.”
Types Of Tools
With so many programs on the market, it can be hard for consumers to know which ones to use. Capouya said that there are four main types of tools, all of which people can incorporate into their lives.
Most people have used a mobile banking app, whether to review their account balances or to do more complicated activities, like depositing checks, moving money from one account to another, or sending payments to friends and family. These programs have dramatically cut down the time it takes to do everyday banking, said Capouya.
If someone wants to find out how much they’ll need to save for retirement or how long it’ll take to pay off a mortgage, they can easily find an online calculator that will give them that kind of information. These tools are arming people with far more financial information than they’ve had in the past.
“Some allow people to play around with retirement dates and determine how much money they need to put aside to achieve their goals,” Capouya said. “These tools provide transparency and awareness.”
Over the past few years, a number of aggregation-type apps have come to market. These programs allow people to see all of their bank accounts and financial information in one place. They can then set budgets, receive notifications if an account balance is low, see investment growth and more. They’ve transformed the way people view their finances.
“People can peer into their financial lives in ways that they couldn’t do before,” Capouya said. “You used to have to sit behind a computer with spreadsheets and work across multiple accounts.”
The latest tool is the robo-advisor, which allows people to easily invest their money in a goal-targeted portfolio. Just deposit funds into an account and fill out a risk questionnaire, and the money gets invested into the most appropriate funds.
It’s a game changer, Capouya said, because it’s made investing less expensive and it’s made it easier for people to achieve their goals. “It helps the investing public put a plan into action and invest for a purpose,” she said.
More Holistic Service
Not only are financial tools making it easier for Americans to get a better handle on their own finances, but they’re also freeing up their advisors’ time so that they can focus on more important work.
Rather than having to invest client dollars or call people up when they overspend, advisors can let the technology do the day-to-day work while they drill down into tax and estate planning or other higher-value offerings.
“It allows advisors to spend more time on holistic value-added advice that clients really need,” Capouya said. “They can take a more macro view of things instead of having to make decisions around rebalancing an account.”
Do Your Due Diligence
As much as technology is helping, advisors and investors should do their due diligence when it comes to the programs they use. You have to ensure that the companies you’re using will keep your sensitive financial information safe.
Start by looking at whether or not the business that makes the software you’re using employs a security team, said Billy Rios, a former hacker and now founder of WhiteScope, a digital security firm. If it does, it’s a sign that it takes hacking threats seriously. Rios recommends checking out the staff list on the company’s website or surfing through its roster on LinkedIn.
Also, see if the company participates in “bug bounties.” Those are when an organization asks third parties to test its product to see if there are any hacking vulnerabilities. Companies that put security at the forefront will make the results of those bounties public, he said.
Don’t skip over the company’s terms of service either. Those terms often indicate how your information may be used and shared, said Capouya.
Finally, use a strong password. “It sounds basic, but create a strong password and don’t use the same password for everything,” she said.
More Innovations Ahead
While the adoption of digital tools has increased, it’s still early days, according to Capouya. Advances in artificial intelligence and predictive analytics could help us figure out our goals before we even know what we want to save for.
Technological platforms will also incorporate behavioral psychology into their notifications, so when the market falls they’ll send out notices to help us manage our emotions.
“There will be some pretty interesting advances in the years ahead that will allow us to make more intelligent decisions about where we should put that next dollar,” Capouya said. “We’ve only scratched the surface, but that’s the great thing about technology — we’re only moving forward.”