Advisor Today - November/December 2015 - (Page 53)

FiNaNcial plaNNiNg By John D. Diehl The Advent of Robo-Advisors They can help, not hurt, financial advisors. T 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 "robo-advisors"-online, automated 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 Consumer reaction management, it appears that human to robo-advisors 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. the term. 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 human advisors. 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 their practices. Melding traditional advisory services with technology has the potential to be a key differentiator for financial advisors by giving them the opportunity to: * Educate and engage current and prospective clients. 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 changing technology. 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
New Products
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
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
Advertiser Index
Back Page

Advisor Today - November/December 2015