Learnings from Google Maps and Google Navigator

You must have come across the new advertisement by Google Maps with the tagline ‘Look before you leave’. For some of you who run with the minute and second hands of a clock every day, this might be a ritual and not just a tagline. Because you know only Google Maps can tell you the actual time of your journey.

Technically, Google Maps gives us the time required, for various commute options, to reach from point A to point B. Let us quickly look at the actual process of navigating from point A to point B. Let’s say Mr. X wants to go from A to B. He will input these into the Google Maps app or web page. Google Maps will display the route options available and the approximate time required. Mr. X can travel from A to B by using his car, his bike, combination of public transport (if available) or walk. Each mode will have different travel time and route changes. The travel time would depend on the traffic conditions at that point in time. Next what Mr. X can opt is to use the inbuilt Google Navigator if he is using his mobile phone. The navigator will prompt directions based on the selected route, track his drive and prompt of the various turns en route. If the traffic conditions change it will assure Mr. X that he is on the fastest route or if needed to reroute Mr. X. If he deviates from that route, the navigator will recalibrate and prompt again. Mr. X can also opt to navigate on his own without using the navigator. While doing so he will have to track his ride and take necessary decisions.

So what were the options available for Google Maps? People would use printed maps or the location of the sun, the moon and the stars while traveling. Some may ask the local people they would meet during their journey. What were the shortcomings of these? It was difficult to use paper maps and exactly determine the location you have reached. Strangers might not give you the fastest route or worse some might totally send you on the wrong path.

So much about Mr. X’s everyday journey. Have you ever wondered how would Mr. X manage his financial journey? Let’s say Mr. X sets on his financial journey to reach planned destinations. The typical destinations would be buying a house, child education, vacations, starting a business, retirement etc. So what options does Mr. X have to reach these destinations?

a) Mr. X would start his journey with the knowledge of the financial products he has. He will have to track his progress all along the journey, estimate the time required to reach the destination and make any course corrections if required. This may or may not be the best method. The success of this would depend on his knowledge and amount of time and efforts he could spare. OR

b) Mr. X would take help of his peers, family members, friends to make the investment decisions. In this method too he will have to track his journey. The success would mainly depend on the knowledge of the people advising him and the intent of those people. OR

c) Mr. X would take help of an online portal to decide the amount and the investment avenues but would invest on his own. Mr. X would be required to review the progress along the path laid down by the portal. This would be better than the above two methods. OR

d) Mr. X would offload the entire work of managing the journey to a financial advisor. Then it would be the duty of the advisor to make the course corrections as and when required. This would be the best alternative but would certainly entail some cost.

What lessons can be drawn from the similarity between Google Maps, Google Navigator and the investment journey of an individual? I have categorized this into mainly two sections – lessons for an investor and lessons for an advisor.

Lessons for an investor:

I believe when Mr. X chooses the first option he would be in the same position of the traveler who uses paper maps. I know you must be thinking why on earth anyone would use paper map today. But there are many who start their financial journey with option a) i.e. buying the financial products based on own knowledge. So similar to any paper map user, Mr. X would not know how far he is from his goal. He would be completely unknown about the difficulties in his route. At the same time, Mr. X would also have to focus on other tasks (read his job, family responsibilities). No doubt it would be difficult for Mr. X to achieve all goals with this approach.

What would happen if Mr. X chooses the second option? As stated earlier the success of this option would depend on the financial competence of his family members/peers/friends. Also, the intent of these people would matter. The products suggested would be based on the personal experiences of these people. The risk tolerance of the investor, the product suitability would not always be the same. Even though many start their financial journey in this way they end up feeling cheated due to wrong product selection or loss of opportunity in some other investment avenue.

The third way is where Mr. X becomes the “Do It Yourself” (DIY) type of investor. He would take help of online portals to work out the investment required based on the goals. Why don’t people always use the Google Navigator? The probable reasons are lack of knowledge about its use, lack of trust on the technology, to save on the internet data costs, save the battery from draining. Similarly, an investor opts to manage the investments all by himself to save on the advisor costs. Here Mr. X has to review his investments regularly, increase/decrease his allocation to various assets classes, track the effects of alteration in tax rules etc. He can always go back to the same portal to track his progress. Also, he would have to keep a check on his insurance requirements (life, health, home, personal accident, motor) all by himself. And Mr. X has to do all these while managing his regular job. Will he be competent enough to do all these? That is a totally different issue.

The last option is where Mr. X engages with a financial advisor. What Google Navigator is to a traveler is the financial advisor to an investor. Google Maps locates Mr. X with the accuracy of few meters. Similarly, the financial advisor will need to know the exact location of Mr. X in is the financial journey. Else the results would be erroneous. The financial advisor will check the income, expenses, assets, and liabilities of Mr. X. He will check the insurance coverage requirement. Then he would decide the investment options based on the risk profiling of Mr. X and the goals. This will be purely based on the return assumptions, tax rules, inflation levels, risk capacity, income levels, liabilities etc. at that point in time. With so many variables there would be a need for periodic reviews and recalibration of the plan which of course is taken care by the Financial Advisor. Ultimately Mr. X gets to focus more on his core job without having to worry much about his financial journey.

Lessons for a financial advisor:

When Mr. X approaches a financial advisor, similar to Google Navigator, he would be doing this with his prior experiences (good and bad) and biases. He might have been the paper map traveller or guided by his family or DIY kind. He would have an affinity to a certain product/asset class (like real estate) and/or would be wary of another (like equity). So the advisor has to make Mr. X as well himself aware of these experiences and biases. Some would approach the advisor only to review their goals and current choice of investments. These type of investors would eventually remain as DIY investors.

Whatever the type of investor, the advisor has to guide him/her with the ‘client first’ approach. Mr. X would be trusting the advisor with his personal information and money. The journey would typically be somewhere ranging between 10-30 years. So the advisor ought to be process driven. Google Maps has built a considerable moat with its offerings. Still, it keeps on adding new features. It has introduced new features like bike mode for Indian roads, in-app ride-hailing service selection. Similarly, an advisor will have to constantly upgrade his knowledge to keep up with the ever-changing product landscape, regulations, and tax rules. An advisor will have to add offerings to his service. Also, he needs to embrace technology in the profession to serve the investor better. Else Mr. X would go back to his way of investing. And this would be an injustice to the investor, to the advisor and to the fraternity as a whole.

Please share ideas, experiences and alternate views.

Prasad Patwardhan

Qualified Personal Finance Professional