Can RIAs survive the rise of the robo-advisers?

By 2020, the majority of wealth management will probably still involve real, live wealth managers, but the rise of the "robo-advisers" continues. Are you ready?
OCT 30, 2013
By  jpnicols
In my last blog post I asked the question: is there a place for personalized service in the digital world? And in it, I discussed the so-called new breed of technology-driven online “robo-advisers” and how they are changing the competitive landscape, whether or not traditional advisers like it or even realize it. Last week I attended Money2020 in Las Vegas to hear directly from some of the “robo-advisers” themselves. Most of the conference was focused on new technologies in payments and e-commerce, but one session “Emerging Wealth Management Solutions” featured Personal Capital CEO Bill Harris, SigFig CEO Mike Sha, LearnVest CEO Alexa von Tobel and Asset Vantage CEO Sunil Dalal. One of the most surprising things from the session was that Mr. Harris, Mr. Sha and Ms. von Tobel all felt strongly that by 2020 the majority of wealth management will still involve real live wealth managers. Also notable was the fact that despite all of the firms' heavy investment in technology, that was not what the panelists focused on in their discussion. At least not in the context of better trading algorithms or more sophisticated asset allocation models. Instead, they focused on how they deploy technology to reduce investor expenses and overcome the common failures of human behavior. In other words, some of the same things that any good adviser should be focused on in their own practice. Ms. von Tobel said that “Money is 10% math, 90% emotion”, and described her firm as “Weight Watchers for the finance space”. I like that analogy because the basic formula to lose weight is deceptively simple — eat less and move more. Yet, people spend billions a year on gym memberships, workout gear and diet books. And yes, on trading advice, financial plans and investment seminars, too. All of the gadgets and bells and whistles are alluring, but the basic formula for growing wealth is simple too — spend less and save more. Setting aside Mr. Dalal, whose firm has a different hardware and subscription driven model (and who was less optimistic about the future role of advisers), the rest of these disruptive asset managers are all RIAs. They are in the exact same business as most of us, they just have a dramatically different service delivery model, and they have collectively raised over $100 million in capital that is betting that their model wins over the long run. I believe they will win if they can convince people to actually change their behaviors. They have the advantage of leveraging their technology to give regular feedback at a scale not possible for most individual advisers. The Nike Fuel Band and competitors like fitbit have helped thousands of people tune into their caloric intake and level of activity needed to burn off the excess. Maybe the next generation of financial advisers will be able to help investors avoid costly mistakes in their financial behavior too. As Mr. Harris said, “The biggest problem is inertia, and technology alone won't help that.” What do you think? What is the best role for technology in an adviser's practice? How are clients' needs for advice and collaboration changing? Join the conversation! JP Nicols is the CEO of the research and innovation firm Clientific, and a partner at Bank Solutions Group. He writes about leadership, innovation and strategy on his blog at jpnicols.com

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.