Outside-IN

Outside-INblog

Outside voices and views for advisers

MLB managers can coach advisers through the robo-revolution

The most successful MLB managers gladly give up tedious tasks to technology to spend more time fostering relationships and building trust with players

May 10, 2017 @ 1:42 pm

By Michael Conway and Zachary Conway

+ Zoom
(Eric Hood)

As the Major League Baseball season kicks off every April, team managers begin the tedious tasks of posting lineup cards, pointing to bullpens and stepping up to post-game microphones. Since the birth of the sport, managers proved their worth with mysterious baseball instinct earned over a long career of watching and playing the game. Thanks to the rise of Sabermetrics, some say managers have become little more than high-paid robots programmed to execute choices based on statistical analysis. Today, nothing needs to come from the gut of a former player past his prime. Instead, teams can rely on the numbers to determine batting orders, position placements and defensive tactics.

(More: Hall of famer Mike Piazza's 'distant cousin' leaves Merrill Lynch for Raymond James)

As baseball managers apparently face obsolescence, financial advisers must contend with similar technology disruption, particularly in the form of robo-investment services. In fact, a recent KPMG study estimates robo-assets under management will reach a staggering $2.2 trillion by 2020. In a digital world, why listen to the supposed expertise of a manager or adviser when a computer can determine which decisions yield the best outcomes? Every manager, player, adviser and client now has access to the same information. As the robots continue to consume market share, traditional advisers need to rethink the way we provide value.

Like managers, advisers believed their value came from some unique and superior knowledge. Managers thought they could outwit the opposing manager in the other dugout while advisers thought they could outsmart markets and gather more returns than the adviser across the street. In truth, this misconception has forever represented a far more serious threat to survival than any technological change. We've never fully understood the importance of the intangible human element. And as big data and technology finally level the playing field, the human element has become our most important differentiator.

The most effective MLB managers knew this all along. They knew that supposed intuition of when to pull a pitcher looks impressive, right up until the batter hits a game-winning home run. They understood that true success didn't come from some secret strategy, but from human interaction and leadership. They harnessed new advancements as tools so that menial aspects of the game didn't distract from their ability to actually coach. They remembered that management meant something inherently human.

(More: How to help clients align their lives with their wealth)

It's time advisers remember what it actually means to advise. Our distinguishable worth above others doesn't reside in our unique portfolio strategy. On the field or in the markets, even the best analysis can't always avoid the unpredictability of poor performance. Instead, an adviser's ability to coach and deter clients from poor decisions represents the biggest differentiator among advisers. A Vanguard study quantified this adviser alpha and showed that investors missed out on 3% in returns per year without professional help. Behavioral coaching, or hands-on guidance in all aspects of a client's financial and personal life, constituted the largest piece of that increase.

Great baseball managers prove the power of the human interaction through accountability. The sense of guilt from disappointing a leader pushes players to perform and compete. In financial planning, clients will likely never feel accountable to a computer screen. They won't feel remorse for going against the plan when they get nervous and click sell on a down day in markets. Without a human to disappoint, they won't worry about spending a bit more than they should, failing to sign the will or disregarding life insurance.

(More: Why the financial planning industry needs a Jerry Maguire-like paradigm shift)

Ultimately, advisers need to remember the importance of providing proactive, person-to-person advice. Rather than fearing faceless robots, advisers can leverage innovation to provide a more streamlined, transparent and intuitive client experience. The most successful MLB managers gladly give up tedious tasks to technology to spend more time fostering relationships and building trust with players. Until clients feel guilty for betraying algorithms, advisers that truly advise will survive the robo-revolution.

Michael Conway is president and CEO at Conway Wealth Group at Summit Financial Resources Inc. Zachary Conway is an associate at Conway Wealth Group.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

May 31

Conference

Spring Excell—Peak Advisor Alliance

Members of the InvestmentNews Research team will be presenting new adviser benchmarking data and providing strategies that can help accelerate the growth of your business. In this exclusive three-hour workshop, InvestmentNews will... Learn more

Latest news & opinion

The appeal and pitfalls of holding unconventional assets in retirement accounts

While non-traditional asset classes held in individual retirement accounts may have return and portfolio diversification benefits, there are "unique complexities" that limit their value for most investors.

Wells Fargo's move to boost signing bonuses could give it a lift

Wirehouse is seen as trying to shore up adviser ranks that took a hit after banking scandal

New Jersey fines David Lerner Associates for nontraded REIT sales

Firm will pay $650,000 for suitability, compliance and books and records violations.

Report predicts $400 trillion retirement savings gap by 2050

Shortfall driven by longer life spans and disappointing investment returns.

Wells Fargo will ramp up spending to lure brokers

Wirehouse, after losing 400 brokers in first quarter, is bucking trend among rivals who have said they are going to cut back on spending big bucks recruiting veteran advisers

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print