What is future proofing? For businesses it’s the process of working with the known unknowns and developing skills to make the unknown unknowns determinable.
Businesses love buzzwords and love to reshape the buzzwords to fit their own situations. For financial advisors keeping up with business lingo may feel like driving a car full of teenagers across town. You know what the topic is from the context, but words get recycled into new and “exciting” meanings. So it goes for the idea of future proofing in financial advising.
What is future proofing? For businesses it’s the process of working with the known unknowns and developing skills to make the unknown unknowns determinable. Known unknowns are those future events that could happen but might not. If a brick and motor business is planning a major launch of a new project in January, a known unknown would be the weather. It could be 70 degrees and cloudless or it could be a snowpocalypse: there’s no way of knowing for sure, but the possibilities can be tackled. Unknown unknowns are those things that could come up but can’t be planned for. Public relations companies in 2007 knew that the Internet would change how they captured the news cycle, but would have no way of predicting the influence Facebook and its progeny would have on how news is made (by you) and disseminated (by you not them). Future proofing, in other words, is the process of examining possible future events (“PFE”s) and developing processes and systems to minimize the impact of those PFEs. Future proofing is usually used in manufacturing-based industries, like electronics, medical devices, and industrial design. However, recently, those involved in climate change have begun to use future proofing more heavily.
At its core, a system, project or company is “future-proofed” when it continues to retain its value and relevance into the future. In the building and manufacturing industries, future proofing builds flexibility and communication into the systems. Similarly, in health care, risk management is considered “baked in” to a system when it’s built with adequate employee feedback to evolve systems and report safety issues. In electronics, a system or new program is considered future proof when the system can be both flexible and also adapt to an increasing size of demand. Your Subaru Forester’s Bluetooth system that only worked with the very last iPhone that was available when you bought it? Not future proofed.
The most common area for all companies no matter the industry to worry about future proofing involves data storage. Clients may worry about both security – can the system adapt to the ever more clever hackers? – as well as capacity for storage as time goes on. An enterprise cloud system will be future proofed when it can handle changes in the systems that will use it, new and advanced threats to its security and increasing load.
From a financial standpoint, clients may be concerned about future proofing their investments from multiple angles. Not only are those clients concerned about investment monitoring and risk management, but also how their employees, families and others may need to access a financial system associated with their financial accounts. Financial advisors can assist clients in understanding cyber security issues and by staying current on the news of cyber security threats. Financial advisors can also assist clients by hosting those with expertise in enterprise cloud systems in informational sessions.
In terms of staying relevant, clients may want to see an investment management strategy that can either be adapted to be future proof or bakes the future proofing elements of flexibility and security into the strategy. Key areas where financial advisors can be helpful here include querying the client about how much they want to include environmental, social and governance factors into their investing. This may include a discussion about how the client sees their duties as a company or individual.
Most advisors have already tackled these questions, or raised them to their clients. So when clients ask how to future proof their investments, it may be helpful to know how to translate the actions you’ve taken as an advisor into this new lingo.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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