Ready to engage robo-shields. Make it so.

Report recommends advisers reconsider fees and boost client experience in battle with robo-advisers

Aug 13, 2014 @ 1:18 pm

By Liz Skinner

Financial planners who fear losing clients in the future to online investment advice platforms should be taking certain business management steps today, according to a new white paper by the Fox Financial Planning Network.

Online investment advice businesses, so-called robo-advisers, are rapidly disrupting the $27 trillion wealth management business — and only those firms that “evolve” beyond the status quo will survive, according to the report, released Wednesday.

For one, advisers may need to lower the fees they charge for investment management and consider upping their price for other services and client “perks,” the report said. Online platforms, which charge a fraction of the fees personal advisers do, will pressure the whole industry to charge less and be more transparent about prices overall.

“A 'robo shield' is the name we have given to the combination of streamlining, staffing and practice management changes firms choose to implement to inoculate themselves from the effects robo-advisers will be inflicting on the industry,” said Deborah Fox, founder of the Fox Financial Planning Network.

(7 client services robo-advisers can't provide)

One facet of the shield is upgrading technology, she said. Firms should improve their technology to create operational efficiencies and enhance client service, such as offering online portals for clients to view their accounts whenever they want, the report said.

Ms. Fox's firm recently received an alert from its client portal reporting a $600,000 increase in a client's bank account overnight, so the firm contacted their client to discuss how to invest those dollars in line with the existing financial plan. The move impressed the client and it couldn't have been matched by a robo-adviser, the report said.

The report also recommends that advisers think about forming a relationship with an online adviser platform as a way to offer “Tier 2” services to children of clients or others who may not meet firm minimums or other requirements. Some firms already have struck such alliances.

“"Advisers who white-label a robo-adviser service can create a profitable lower-end offering that they may be giving away now," said Tim Welsh, president of adviser consultancy Nexus Strategy, which helped develop the report.

He said advisers should be careful about which online advisers they team up with because not all will be winners and they don't all want to work with advisers. The report offers guidance on which online firms are most adviser friendly.

The Fox Planning Network report recommends that an adviser consider 20 specific practice-changing moves now to arm themselves against robo-adviser competition, including becoming known for serving a niche, creating a firm culture that puts clients first, standardizing and systematizing service pathways, automating workflow steps, lowering AUM fee and adding an annual retainer, and embracing social media.

0
Comments

What do you think?

View comments

Most watched

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

INTV

Schwab's Jeff Kleintop: Prep for volatility given China trade uncertainties

China could be considered a developed market in five to seven years , according to Jeff Kleintop, chief global investment strategist, Charles Schwab.

Latest news & opinion

Advisers step up efforts to help clients manage student loan debt

As some Democrats campaign to wipe the slate clean, financial planners focus on limiting the amount students borrow.

Funding for Reg BI, other SEC advice reform efforts denied in Waters amendment

House likely to approve measure that effectively kills rule package, but it faces uphill battle in Senate

Wall Street lashes out at Sanders' plan to pay off student debt with a securities trading tax

Financial pros argue that a transaction levy will hurt mom-and-pop investors along with investment houses.

GPB paid B-Ds and reps steep commissions to sell troubled private placements

GPB paid commissions of 9.3%, or $167 million altogether, on the firm's private placements.

Give us a break, active managers say

Seven portfolio managers share their outlooks for the rest of the year, generally agreeing that it's been hard for active managers to stand out.

X

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.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print