Practice Management

Robo-advisers transform from threat to tool

Forward-thinking advisers and robo-advice platforms are finding middle ground that could be a boost for all involved

Dec 21, 2014 @ 12:01 am

By Jeff Benjamin

The robo-advisers might still look like a looming threat to a large swath of the financial advice industry, but some forward-thinking advisers and robo-advice platforms are finding middle ground that could be a boost for all involved.

Beginning with the premise that people working with financial advisers tend to invest smarter than those without advisers, Brian Murphy, president of Pathways Financial Partners, is embracing robo-advice — or online, often automated investment planning — for all it's worth.

An adviser for almost 30 years, Mr. Murphy is launching a robo version of his advice business in January that will come with lower fees and personalized service, but no face-to-face meetings or golf outings.

“Advisers fear that they're going to be replaced by technology,” he said. “What we're doing is offering a service that is that technology.”

Even for a relatively small firm like Mr. Murphy's, which has about $100 million under advisement, the econo-mies of scale can add up quickly when technology is embraced.

He has already added two advisers to work exclusively with online clients, and expects to add two more within the next few months.

The real kicker is that he believes each adviser should be able to handle between 300 and 500 online clients.

Custodians are stepping up efforts to help planners embrace the change, and some advisers are already taking the challenge — or opportunity — very seriously.


Ric Edelman, founder of Edelman Financial Services, has been making a significant charge into the robo-advice space, along with warning that advisers who are ignoring the technology will suffer in the long run.

“I think robo advice is a real threat in many ways to traditional financial advice,” he said. “A lot of traditional practitioners are going to find it difficult to compete and justify their fees if they don't adapt.”

Two years ago, Mr. Edelman launched an online version of his traditional advice business that has grown to $48 million with more than 1,100 clients.

“I would venture to say we're the only online adviser that's currently profitable,” he added.

Mr. Edelman has $14 billion under advisement, and his online clients pay the same fees as his more traditional clients, “because they also have access to our planners on an unlimited basis.

“We've already added advisers, and we're in the process of adding a new online division with a dozen more advisers,” he said. “We haven't had any clients move from traditional relationships to online, but we've had online clients move to the fulltime side of the business.”


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