Beating robo-advisers at their own game

I'm attending the Morningstar Investment Conference in Chicago, beginning with a panel titled "Adviser technology: incorporating the latest tools into your practice." Moderated by technology expert Joel Bruckenstein, panelists James Dowd of North Capital, Mark Balasa of Balasa Dinverno Foltz, and W. Cam Goodwin of HawsGoodwin Financial discussed how they use technology to serve expanded client segments. For decades, financial advisers have focused on high-net-worth clients. This strategy has provided advisers with great financial and professional success. With the advent of robo-technology, basic — and not so basic — investment services are now available to investors of every financial status. Not only are robo-advisers attracting younger investors, they are also causing high-net-worth investors to ask "Why am I paying so much for financial advice?" The answer must go beyond human interaction. According to Mr. Bruckenstein, advisers cannot be complacent about current practices, and sluggish to adopt new technology. Complacency will only lead to a declining business. The panel discussed the following risks: • Current and potential clients want more advanced tools and communication means. Not offering these will push business to competitors. • Young investors are used to and demand technology. Not providing high-tech offerings will cost the business of new generations. • Young investors are the high-net-worth investors of the future. Without technology, advisers can't profitably serve them and, thus, will not build relationships with a growing client base. The conclusion: Advisers must employ better systems that will allow them to profitably serve younger investors while bringing improved, modernized enhancements to their high-net-worth clients. Elements of the new required technology include: • Paperless contracts and account opening • Online financial planning and risk tolerance questionnaires • Streamlined financial planning • Automated portfolio management (rebalancing) • Client portal Implementing this technology can be as simple as signing on with an integrated provider or going for a more customized approach by piecing together individual tools to your liking. No matter the approach, advisers must up their game or risk losing the game. Sheryl Rowling is head of rebalancing solutions at Morningstar Inc. and principal at Rowling & Associates. She considers herself a non-techie user of technology.