Embrace, don't fear, the 'robo-adviser'

The truth is that robo-advisers are more likely to be an adviser's friend than foe

Feb 16, 2014 @ 12:01 am

By Frederick P. Gabriel Jr.

After attending the T3 Technology Tools for Today conference last week in Anaheim, Calif., I think that financial advisers and planners should embrace — not fear — the rise of the so-called robo-adviser.

Although the term “robo-adviser” immediately conjures images of Arnold Schwarzenegger (think Terminator, not governor), the truth is that robo-advisers are more likely to be an adviser's friend than foe.

Robo-advisers won't replace advisers — at least not the good ones.

Neesha Hathi, senior vice president of Advisor Technology Solutions at The Charles Schwab Corp., agrees.

“Has WebMD replaced your doctor?” she asked from the podium at T3.

The answer, of course, is no.

Robo-advisers may be the best thing to happen to the advice industry since the dot-com crash taught many do-it-yourself investors that they weren't as “gifted” as they thought and that financial planners are worth their weight in gold.

For many investors, especially those who are young and lack significant assets, robo-advisers will provide an introduction into the value of basic investment advice. Not only will robo-advisers encourage such investors to adopt a systematic savings program, they will introduce them to the value of investing earlier than if they were left on their own.

As those investors get older, amass more assets and face more-complicated planning decisions, they likely will be more receptive to the more comprehensive planning available through human advisers.

To be crasser, robo-advisers may serve as pushers to get investors hooked on the value of financial advice. †

Another benefit of robo-advisers is that they may actually train clients to be more comfortable with adviser-assisted technology for the delivery of advice.

Interestingly, I got a glimpse of what this could look like last week, not at T3 but at the Hertz car rental center at Los Angeles International Airport.

I was standing behind 50 or 60 people waiting to see a rental agent, when a manager announced that Hertz's self-service kiosks were available for use nearby. Only about eight of us jumped out of the line and headed to the kiosks.

The kiosks had a television screen and video camera that connected me to a live customer service agent. Within minutes, I walked away with a car rental agreement and the feeling of having received the full experience of renting a car with the help of an actual person, even though that person was most likely in an operating center hundreds, if not thousands, of miles away.

Why can't financial advice be delivered the same way?

It can. In fact, many advisers are already using video conferencing in place of face-to-face meetings with their clients to serve more clients and add to their own geographic reach.

Those advisers will become more common.

Advisers shouldn't fear robo-advisers; they should become them.


What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video


Top questions surrounding future of DOL fiduciary rule

Reporter Greg Iacurci and managing editor Christina Nelson discuss the biggest uncertainties springing from the Fifth Circuit Court of Appeals' decision to vacate the regulation.

Latest news & opinion

What the next market downturn means for small RIAs

Firms that have enjoyed AUM growth because of the runup in stocks may find it hard to adjust to declining revenues if the market suffers a major correction.

DOL fiduciary rule likely to live on despite appeals court loss

Future developments will hinge on whether the Labor Department continues the fight to remake the regulation its own way.

DOL fiduciary rule: Industry reacts to Fifth Circuit ruling

Groups on both sides of the fiduciary debate had plenty to say.

Fifth Circuit Court of Appeals vacates DOL fiduciary rule

In split decision, judges say agency exceeded authority.

UBS, after dumping the broker protocol, continues to see brokers come and go

The wirehouse has seen 14 individuals or teams leave and five join for a net loss of $2.4 billion in AUM


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print