Robo-advisers and human advisers adopt each others' biggest advantages

Digital advisers are hiring live planners and advice firms are deploying automation

Feb 21, 2017 @ 3:00 pm

By Liz Skinner

The battle that's been brewing between live financial advisers and automated advice providers seems to have ended in a draw.

Both sides of the fight are largely adopting their opponents' biggest advantages and the lines between robo and live advice have blurred.

"In the competition between digital and human advice, we saw over time that neither was the complete package," said Vanessa Oligino, director of business performance solutions at TD Ameritrade Institutional. "Human plus digital is really the way things are going for the future."

Many firms already blend the two, as robo-advisers have discovered many clients want at least some live help with investing and traditional advice firms recognize that clients want more of the digital experience they've become accustomed to from services like Amazon and Netflix.

Charles Schwab is set to come out with a hybrid-robo model for clients with $25,000 by June. Schwab Intelligent Advisory will provide clients a customized financial plan and ongoing live advice from certified financial planners, as well as an automated portfolio.

Recently, digital advice firm Betterment added new service plans that allow account holders with at least $100,000 to reach out to live advisers via phone or email. It's also matching clients who want a full-time dedicated financial adviser with registered investment advisers who use the Betterment for Advisors platform, essentially providing a referral network to these advice professionals.

Meanwhile, the most successful of the firms with a digital advice platform, Vanguard Group's Personal Advisor Services, has long offered live advice. It now has $52 billion in assets, compared with Schwab's robo-adviser for retail investors and its adviser platform, which have about $12.3 billion, and Betterment, which has $7.4 billion in its retail, retirement and adviser channels.

"Firms of the future are going to be both," said Alan Moore, co-founder of the XY Planning Network. "They are going to be technology heavy and human heavy."

(More: 10 ways to embrace trends radically changing financial advice)

The robo movement has had a significant impact on traditional advisers. For one, the cheaper automated options have increased the pressure on firms to defend the fees they charge clients for planning and investment services.

But the success of robos to date, including with clients who are older and have amassed wealth, have shown advisers that clients want more technology served up with their financial services.

"Robo-advisers taught the traditional wealth management industry that they need to step their game up and utilize new technologies that people are getting in other areas of their life," said David Lyon, chief executive of fintech firm Oranj and a former adviser.

(More: The journey from financial advisers to tech entrepreneurs)

In fact, the number of financial advice firms using robo-platforms and planning to add automated advice for clients is on the rise.

About 7% of advisers said they have integrated digital advice technology in their business in a survey early this year, compared to only 3% in 2015, according to the 2017 InvestmentNews adviser technology benchmarking study, which included about 292 advisers.

About 20% of advisers said they plan to offer robo-advice within six to 12 months, the survey found. That's up from 10% in the 2015 survey.

Ryan Linenger, partner at Plante Moran Financial Advisors, said it has been a big change for many traditional advisory firms to figure out the right mix of offering clients more high-tech service, and continuing to provide personalized advice.

"Clients want the latest technology, but in a way that still has a holistic plan for them," he said.

One firm that has remained committed to the pure automated advice model is Wealthfront, which has about $5.1 billion in assets under management.

The firm recently added more digital financial planning capabilities to its service, which is aimed solely at young investors.

"The response from clients so far has been overwhelmingly positive," said Kate Wauck, spokeswoman for Wealthfront.

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