Advisor Today - November/December 2015 - (Page 53)
By John D. Diehl
The Advent of Robo-Advisors
They can help, not hurt, financial advisors.
echnological advances have long
been altering consumer behavior
and impacting traditional
businesses. Online ordering from
home has taken the place of in-store
shopping, and e-readers have made
brick-and-mortar book stores a rarity.
The financial industry now has
services that use an algorithm to
provide investors with wealthmanagement advice.
Robo-advisors operate independently
of human financial planners, typically
charge less and do not require users to
have a minimum value of investments.
Will robo-advisors replace human
financial advisors? In my opinion, the
answer is no.
Robo-advisors actually represent
an opportunity for human financial
advisors to scale their business.
Advisors who educate themselves
Robo-advisors represent an
about robo-advisors and consider
scale their business.
ways to integrate them into their
practices will be well-positioned as
reason working with a financial
this technology gains traction.
advisor is more appealing than a
robo-advisor. In the case of wealth
management, it appears that human
wins out over automation.
According to a recent study
The study also revealed that
conducted by Hartford Funds, roboMillennials-those born in the 1980s
advisors have not quite permeated the and 1990s-are unsurprisingly
investment world, despite industry
the demographic most likely to be
chatter. While about half of advisor
enticed by the low-cost, time-saving,
respondents indicated familiarity with automated robo-advisors.
robo-advisors, an overwhelming 89
This generation was reared
percent of consumers had never heard on computers and smart phones.
Accordingly, 68 percent of Millennial
Once the concept was explained to
respondents indicated comfort
those consumers, only 13 percent felt
with using online platforms in their
that a robo-advisor would be relevant
financial planning, and those comfort
for their personal financial needs.
levels showed to decrease with age.
Despite the proliferation of technology,
However, while Millennials
the majority of consumers reported that are more tech-savvy and embrace
they are not comfortable with using
innovation, they were also the
technology to manage their finances.
group in the survey most likely to
identify the merits of working with
Humans win out
Seventy-two percent of them also
Financial advisors should
listed basic human interaction as the take heed, because by 2020, the
opportunity for advisors to
Millennial group will comprise nearly
half of workers and investors, making
them an important group to reach.
Working with robo-advisors
Given these results, I consider roboadvisors to be advantageous to
financial advisors, and suggest that
they integrate this technology into
Melding traditional advisory
services with technology has the
potential to be a key differentiator for
financial advisors by giving them the
* Educate and engage current and
Investors rely on financial advisors
for guidance and knowledge.
Teaching clients and prospects
about robo-advisors will
demonstrate an understanding of
the latest advances in the finance
industry and an acceptance of
cont'd on page 55
November/December 2015 | ADVISOR TODAY 53
Table of Contents for the Digital Edition of Advisor Today - November/December 2015
From the Editor
In Step with a Winner
Finding Success in the Chinese-American Market
Dealing with Client Confidentiality
Hashtag Your Way to Social Media Relevance
Starting the LTCI Conversation
From Term to Perm
Protecting the Downside with Allocation Adjustment
Jules Gaudreau: A NAIFA Success Story
NAIFA Takes NOLA
Helping Clients Cope with Market Volatility
NAIFA Government Relations
Working with Single Women
Financial Planning FAQs of Small-Business Owners
Three Retirement Conversations to Have with Clients Today
The Advent of Robo-Advisors
Moving into the Retirement Space with 401(k) and 403(b) Plans
Moving the Sales Process Forward
Cultivating the African American Market
The Lighter Side of LIfe
Advisor Today - November/December 2015