Advisers' next evolution: Pairing with online platforms

Advisory firm execs considering how to partner with robo-advisers or build a digital advice model into their own offerings

By Liz Skinner

May 30, 2014 @ 9:58 am (Updated 2:49 pm) EST

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Resigned to the fact that so-called “robo-advisers” are here to stay, many advisory firm executives are considering ways to partner with these firms or to incorporate the digital advice model into their own offerings.

About 31% of registered investment adviser and broker-dealer executives polled in an informal Fidelity Institutional survey earlier this month said they plan to look for ways to partner with a digital adviser. A quarter of the executives said they might incorporate an online model into their existing business, according to the poll released Thursday.

“They're seeing that coupling slick technology and a human element will allow them to tap a broader consumer base than they can currently tap because it will overall be more efficient,” said Michael Durbin, president of Fidelity Institutional Wealth Services.

The question posed to the advisory firm executives didn't include a time frame for these integrations. But Mr. Durbin said he hears about new discussions going on almost weekly, and more and more of Fidelity Institutional's RIA clients are coming in and asking how they should be thinking about the digital advice model.

The rapid rise of online financial platforms in the past couple years has left some traditional firms worried about the possible shrinking role of human personal financial advisers, in the same vein that travel agents experienced in the past decade. However, a new view — that these technologies are not a replacement threat but a useful tool for advisers to enhance the client experience and make their own businesses more efficient — is starting to take hold.

Regardless of whether they view digital advisers as a menace or a mate, 74% of the executives in the Fidelity Institutional poll said they recognize robo-advisers are here to stay. And many aren't going to take a wait-and-see approach to their potentially disruptive impact.

United Capital Financial Advisers is one firm embracing digital advice opportunities. It is partnering with FlexScore, a firm with an interactive online tool that produces a single number to represent the user's personal financial health. FlexScore also offers free advice on how to improve that score, such as paying down debt or starting a college savings plan.

In late April, United Capital said it will include the firm's FlexScore Pro, an adviser version of the product, into its service offerings. It's not available yet through United Capital, but the firm is working on incorporating the self-directed tool, according to Gail Graham, the firm's marketing chief.

United Capital already makes another interactive online tool called Money Mind available on its website. It helps uncover certain biases that may influence the way someone thinks about money and makes investment decisions. About 41,000 people have used the Money Mind online tool, Ms. Graham said.

“Our philosophy has been to give people tools that they can play with and will intrigue them and then hopefully they will want to be clients, too,” she said.

Two other firms integrating a digital adviser model are Convergent Wealth Advisors and Mariner Wealth Advisors. Convergent, which previously concentrated on very high-net-worth clients, created a platform for smaller investors last year that also provides access to financial advisers mostly by phone and video conference.

Mariner actually launched a separate firm called FirstPoint Financial that has no client minimum account balance.

FirstPoint aims to “merge objective financial advice with cutting-edge technology to provide an easily accessible solution to all,” Martin Bicknell, FirstPoint and Mariner's chief executive, said when the new company was announced in October 2013.

The Fidelity poll results suggest many more integrations may be on the way, and the changes they inspire will be felt throughout the industry.

About 65% of the advisory firm executives polled said they expect digital advisers will increase the availability of advice to more people, especially those who aren't affluent; 53% said they will result in lower prices for investors; and 49% said online advising will raise client expectations for using technology and make doing business easier for all firms in the industry.

About 92 executives completed the survey during a meeting in Orlando this month for clients of Fidelity's custody and clearing units.