Financial advisers must adapt quickly to competition from robos to stay in business: CFP Board

The CFP Board's research is the result of a gathering of more than two dozen fintech and other industry experts, who pondered how the advice business will change by 2021.
DEC 15, 2016
Financial advisers and their firms will need to evolve over the next five years or they may face an inhospitable landscape where most clients' needs are met by digital advice platforms, a new report concludes. Although the precise impact that robo-advisers will have on the industry is unclear, financial planners will need to adapt quickly to pressures from robos and additional regulations if they want to stay in business, according to the report released Thursday by the CFP Board of Standards. The report is the result of an August gathering of more than two dozen fintech and other industry experts, who pondered the role that robos and humans will play in the advice business by 2021. “The group's insights and recommendations will prove valuable as our profession evolves to meet the needs of current and future clients,” said Kevin Keller, chief executive of the CFP Board. (More: Standout features of 10 robos aimed at advisory firms) The group, which met in Washington, considered scenarios that range from everyone choosing to use just digital advisers to a mock scene where a massive cyberattack of an online advice platform causes real financial losses and a surge in the demand for human advice. In the greatest consensus of the group, one third said they believe by 2021 most clients will trust digital investment managers and that all clients will pay less for these services, even if they engage a human adviser. They believe advisory firms will incorporate the same automated technology, but will combine it with human advisers to provide face-to-face meetings for portfolio reviews or additional services. Some human advisers will successfully provide advice to high-net-worth clients who want high-touch services, the report predicts. (More: The journey from financial advisers to tech entrepreneurs) Overall, the report recommends advisers figure out how to serve the needs of specialized clients and focus on areas where humans can provide value, such as behavioral and emotional coaching or concierge services. The firms that have great access to data and stronger information about their customers will be positioned to offer better advice, the report said. Grant Easterbrook, a participant in the meeting and founder of digital retirement platform Dream Forward, said data will make advisers “more effective when they go in to finish the job” of helping clients plan their financial futures. “It cues things up so that advisers spend his or her time focused on doing what they do best,” he said.

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