How to make the most of human and robo-advice

Advisers must understand how and when to message and use new tools for the benefit of their clients.

Like many new technologies, when robo-advisers were ordained a “disruptive technology” the ensuing hype was near deafening. Low-cost, automated financial advice was deemed the future of investing. As often happens, however, much of that hype has given way to the realities of the technology’s limitations — namely the reluctance of many investors to leave their money management solely in the hands of an algorithm.

While robo-advisers are best suited to do-it-yourself investors seeking a simpler financial strategy that requires primarily asset allocation and re-balancing, recent survey findings from GfK show even millennials have their hesitations about relying on automated advice. Just 17% of respondents aged 25-34 said they would be likely to trust a computer algorithm more than a human to give them financial advice. That percentage dips to 7% among respondents aged 65+.

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These hesitations are compounded in times of market volatility, with many firms experiencing an uptick in customer calls coinciding with major market fluctuations. It’s not surprising that investors want to consult with an adviser they have come to know and trust to address their concerns and provide them with a course of action that makes the best of an uncertain market.

The most effective investment paradigm brings together the best of both worlds. Advisers must understand how and when to message and use new tools for the benefit of their clients. The cost of new technologies and the new processes that go along with them are a significant investment. Development efforts to ensure advisers are properly trained to maximize these technologies should be equally significant.

Following these three steps will ensure that the adviser “X factor” will positively impact the investor experience:

• Reinforce the adoption of new technology. A significant amount of training on how and when to use robo-advisers needs to be conducted to ensure successful deployment. However, research has shown that in as little as 30 days nearly 80% of new information is forgotten. So, when advisers are faced with retaining copious amounts of new information, it’s important to ensure the training is not of the “one-and-done” variety. Knowledge-reinforcement platforms can bolster the information that advisers retain, and graphically track which advisers are ahead of and behind the curve and which topics are proving to be most challenging. Focusing on post-training knowledge retention will help to ensure protocols are followed and technology tools are used to the fullest customer advantage.

(More: Millennials like blend of robo and human advice)

• Align messages. Investors place a high value on a personalized relationship with their adviser, even when that means helping them make sense of automated investment advice. Building enduring relationships requires the adviser to strike a balance between customer needs and corporate objectives. Additionally, advisers must adhere to operational and compliance procedures, deliver evolving corporate messages, and speak knowledgeably about the full product suite available. This is a lot to take in, especially for new advisers. Continuous message reinforcement is critical to helping advisers home in on the highest-value messages that they can seamlessly apply to their client conversations.

• Shape conversations. By some accounts, nearly as much as 80% of growth for advisers comes from existing customers. That makes the cost of new customer acquisition incredibly high in comparison, though considerable skill is required to build long-lasting customer relationships. Ongoing development programs that help advisers build deep industry knowledge, acute listening skills and the ability to ask the right questions can prepare advisers to excel at value-added customer conversations. With this kind support, advisers can better assess what an investor needs at the beginning of a relationship, which may well be a robo-adviser approach, and use consultative conversations to help the relationship grow as an investor’s assets grow. Advisers who conduct conversations that demonstrate expertise and build trust will always be in demand.

(More: Schwab’s Bernie Clark on balancing technology and relationships in financial advice)

Following these three steps will help advisers successfully maximize the best of human and digital interplay to advance customer, and corporate, success.

Michael Gear is senior vice president of worldwide sales at Qstream.