“Is the future of finance bright?” That is a question that I asked myself a few years back when reading an article written by Charles K. Smith. At that time, I was focused on working as a financial advisor. He was focusing on his goal to be” Tech Savvy” to get into the “Tech Suite” at Xerox. Well, let me say that Charles is a very insightful writer with solid credentials. I enjoyed his article because it brought up some interesting issues and presented some challenges for current and upcoming financial advisors.
As someone who has worked in the finance industry, and as someone who know the technology, I did like his take on the future of finance. In fact, I agree with him on some aspects. However, I would like to take a moment to highlight some areas where he went off-track in his arguments. For instance, he talked about Best Practices in Financial Services, which is an interesting topic, but doesn’t have a clear definition. As someone who works in the industry, I am always concerned when Firms use terms such as Best Practices that have no clear definition, which make it seem like they are talking about best practice for a particular business or investment.
Another area he didn’t adequately address was Innovation. It’s important to address Innovation because it drives the future of technology. Firms need to come up with a new innovation in order to stay relevant in an increasingly competitive market. As an advisor, it is absolutely critical that firms are capable of innovating. However, Charles Smith seems to forget that innovation can be a positive thing if it is done in a way that adds value to the overall firm, rather than simply driving cost into the negative.
I also believe that Mr. Smith fails to recognize the distinction between Best Practices and Innovation. When discussing Best Practices in financial services, he makes the mistake of equating those practices with good corporate governance. He seems to think that such policies help to align firms with best practices, which is why they should adopt them. This is not the case. Best Practices are merely guidelines that help to guide financial companies toward good risk management practices. They do not tell firms what to do.
Further, Best Practices from the accounting sector are not necessarily applicable to the future of Fintech. Accountants have developed a set of rules and principles over the years that they are willing to stick to no matter what the current trends in the economy happen to be. There are no new rules to adhering to if you work as an accountant. This is not the case for the financial industry.
Finally, his discussion on Digitalization and the Cloud did not go far enough. I would have liked to have heard more about how Fintech will impact society through its innovations, and what the implications are for current businesses. The world is already witnessing the impact that Digitalization has had on traditional brick-and-mortar retail stores. While it may be too early to predict the impact that technology will have on lending and home ownership, it is safe to say that most consumers have already shifted their purchasing habits to the online world where they can purchase whatever item they want from the comfort of their homes.
Finally, I am disappointed that Mr. McKnight did not go much further in discussing automated systems for loan underwriting. As the industry leader in this technology, the question of who will take over the role of the banker in the future is a logical one. Will it be the banks, private investors or consumer driven organizations? None of these three has a clear advantage over the other. This was a rather one sided discussion and could have been made more interesting had Mr. McKnight offered alternative perspectives on the subject.
Overall, I am not very impressed with the thinking of the author on the subject. His arguments are mostly based upon his own experience as a bank employee. I do realize that he has had great success at that position. However, anyone who is considering entering the industry should learn as much as possible about all the different aspects before investing. If you do that you will have a much better chance of surviving in this troubled time. I wish Mr. McKnight the best of luck as he looks to move into the future of fintech.