Indie B-Ds late to the robo game

Independent broker-dealers haven’t seen digital advice services as important enough to offer their advisers. That may change next year, though.
About 93% of the 42 independent broker-dealers surveyed in the 2015 InvestmentNews’ IBD Tech Choices survey said they do not offer a robo-platform to their advisers, but 63.2% said they are planning on offering one in the future.
Of those forward thinkers, 25% plan to roll a robo out in the next six months, followed by 50% in the next six to 12 months and 25% in up to two years.
“This is coming fast and furious right now,” said Chip Kispert, an IBD consultant at Beacon Strategies. “They are trying to get their arms around it.”
Mr. Kispert said independent broker-dealers may be late to the game because they want to pick the appropriate partners with which to work.
‘THINGS MOVE SLOWLY.
“That’s something that takes time for them,” he said. “Things move slowly, especially when with compliance and infrastructure demands.”
Darren Tedesco, managing principal of innovation and strategy at Commonwealth Financial Network in Boston, said for his firm, it was a matter of coming out with better-than-the-rest technology. Commonwealth already had a lot of the services robo-advisers offer, perhaps even more, with the likes of TurboTax and Quicken integrations, but robos have been significantly better at putting it all together.
“We weren’t ready to package it,” he said. “Some robos are doing better than we are so we didn’t want to go to market.”
Commonwealth will be ready soon though. It announced last year it was looking to roll a robo-platform out, and Mr. Tedesco said that may come as soon as the second half of 2016.
When it does, he said, it will include “ingredients” the other robos don’t yet have, like mobile check deposits and client-controlled money movement.
He said robos are a good way to outsource portfolio management and shift clients who may not be the “perfect fit” for advisers, but who advisers serve regardless. He added, however, that some advisers may see robos as a threat, especially if they are not successful at communicating their value versus their fee.
“If your clients don’t get the value and you have a cheaper offering, what will keep them from jumping to it?” he said. “That scares the heck out of a lot of advisers.”
Still, it’s a platform worth considering for many independent broker-dealers.
Cambridge Investments, an independent broker-dealer in Fairfield, Iowa, expects to have a robo next year. The firm said it already has a significant amount of robo-like features, but plans to deliver a digital suite with more comprehensive, user-friendly tools.
“As the next generation investor clearly takes the reins, their expectations — not exceptions — will be that adviser offerings include a digital solution,” Amy Webber, president of Cambridge, said in an email.
One of the largest independent broker-dealers, LPL Financial, announced during its annual conference in July that it was rolling out a robo platform in two months.
GOOD PROGRESS
That hasn’t yet happened yet, but Peter Gilchrist, a spokesman for the firm, said LPL is making good progress and has assembled a pilot group of advisers to push the platform forward.
“While we do not believe robo-advisers will replace the need for personal, objective financial advice and counsel, the rise of the robo-adviser trend is likely to create opportunities for our industry,” Mr. Gilchrist said.
Online advice ranked last in the InvestmentNews’ study on the highest areas of technological investments for independent broker-dealers in 2016, at 34.1%. Ranked above it were adviser productivity, at 87.8%, internal infrastructure at 80.5%, websites at 78% and adviser services at 65.9%, client services at 53.7% and adviser marketing and sales at 48.8%.
Other independent broker-dealers may continue to hold off until they learn more about what these platforms can do for their advisers, Mr. Kispert at Beacon Strategies said. But they won’t be too far off.
“Regardless of how ‘robo’ is defined, it is a long-term play, not distant but also not immediate,” Ms. Webber said. “And to be successful in the future, it will be important for advisers and their broker-dealers to have some offering or response to the digital demands of investing clients.”