Clients won't go anywhere if you robo-proof your practice

Advisers can highlight comprehensive financial planning as the real value they offer, not just picking funds

Jun 16, 2015 @ 5:30 pm

By Alessandra Malito

Robo-advisers may be a daunting threat to some advisers, but for those who robo-proof their practices, they may not be as scary.

The steps are pretty straightforward, though not necessarily easy. In an InvestmentNews webcast, experts agreed that advisers will need to show their value and embrace technology, whether that's implementing their own automated investment platform or finding another way to add that extra service with a human touch.

"Use the automation features and the simplicity that has now been provided for us, and combine that with your human touch," said Deborah Fox, founder of the Fox Financial Planning Network. "That, in my opinion, is the model that is going to thrive."

There's a process for advisers to complete before launching a robo-adviser platform: clarifying the firm's vision, defining the target market, developing the service model, setting the price and revising compliance policies, to name a few.

Even then, it takes more than just offering this sort of automated investment technology to sustain success.

"Don't just create your robo and throw your clients on there," said Kristen Luke, co-founder of Kaleido Inc., a strategic consulting and marketing agency for financial advisers.

Taking advantage of these newer technologies is a challenge. Craig Faulkner, chief executive of Faulkner Media Group, a marketing firm for financial advisers, said he sees hurdles in getting up to speed all the time.

"One of the things we struggle with, working with thousands of financial advisers, is getting them to embrace technology and really taking a keen interest in it," Mr. Faulkner said.

He added that if advisers don't want to take on the tasks of overseeing a robo-adviser platform themselves, then they should hire it out to a third-party service provider.

With the commoditization of advice spurred by the robo-adviser movement, advisers need to focus on everything above and beyond selecting the investments for clients' portfolios.

"There is going to be a shift toward financial planning being the value," Ms. Luke said.

The three panelists agreed that there are many nice qualities to robos — their sleek design, easy onboarding and account aggregation, as well as the ease in which they break down portfolios and fees in a digestible manner for investors.

However, there's one thing most lack: the human element. While having a robo-adviser platform to offer clients can only help a wealth management firm, person-to-person communication is key. So much so, in fact, that when the next economic downturn hits, having a real human adviser to turn to could help clients to see the big picture and avoid a long-term aversion to the markets.

"I expect it will be some level of a bloodbath for [the robos] that are consumer-facing," Ms. Fox said. "The ones that are adviser-facing theoretically should be able to avoid that type of scenario, because there should be communication occurring."


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