Financial advisers got a unique view of the robo-advice movement in San Diego at the Insider's Forum.
Among the takeaways presented from a panel of digital-advice experts is that
robo-advice is a reality, but doesn't have to be viewed as a threat to the
financial planning industry.
“Just because it's a robo-platform doesn't mean it's a threat, because not all robos are inexpensive, offer good client experiences, or have competent analysis,” said Joel Bruckenstein, a digital advice consultant and author with T3 Conferences, who moderated the session on Tuesday.
In challenging the audience of financial advisers to open their eyes and minds with regard to the digital-advice movement, Mr. Bruckenstein singled out the $30 billion Vanguard Personal Advisor Services as “the benchmark of the future.”
Even though robo-advice platforms have been around for a half dozen years, he questioned the generally
sluggish pace of adoption across the advice industry.
“If this is such a great thing, why don't all of you already have one?” he chided. “The technology is solid, so that shouldn't be an impediment to you engaging with one of these firms today.”
The still fledgling and relatively fragmented robo-advice industry comes in many shapes and sizes, with some platforms aiming directly at consumers and others seeking to work with financial advisers.
Mr. Bruckenstein listed his criteria for evaluating any digital-advice platform as the following: Custodial integration, third-party integration, end-client experience, risk assessment, investment process, and fees.
Tom Kimberly, general manager at
Betterment for Advisors (formerly called
Betterment Institutional), addressed the slow adoption rate by claiming it is characteristic of the deliberate way the financial-advice industry embraces any kind of change.
“
Betterment has been around for six years, and
Betterment for advisers has been around for a year and a half,” he said. “We're in the early days in terms of the development of technology, and in terms of shifting the direction of the overall advice industry.”
Mr. Kimberly cited research showing that of the “44% of consumers that have digital expectations, almost half of them are baby boomers. Contrary to popular belief, what we're doing here is not about millennials.”
Simon Roy, president of
Invesco Jemstep, echoed that sentiment, insisting, “There is no finish line here.”
“Digital expectations are rising, desires are rising, and I think right now we're only a little beyond the first inning,” he said.
Mr. Roy described leading robo-advice platforms like
Betterment and
Wealthfront as “the barbarians at the gate, going straight at financial advisers.”
“We look at firms like
Wealthfront and Betterment as our friends because they helped shine a light on what technology can to do help advisers,” he said.
When asked by Mr. Bruckenstein to describe the kinds of firms that are right for robo-platforms, Mr. Roy first described the types of firms that would not be a good fit.
“Firms on a glide path toward retirement, that are on a five or 10-year path,” he said. “Second, would be firms looking to outsource their clients with a robo on the side, and third, would be firms without a good value proposition to attract clients and prospects.”
The idea that robo-platforms is not a case of 'if you build it they will come' was repeated throughout the panel discussion.
“The kinds of firms we are a good fit for are those with a plan to transition clients onto a digital platform, and firms looking to integrate with other platforms,” Mr. Roy added.
Mr. Kimberly said the types of firms he believes are best suited for robo adoption include the “financial planner that typically doesn't do investment management, and another type would be a large firm that wants to segment some of its smaller clients.”
“Let Betterment manage the investments, while the advisory firm can still charge a monthly retainer on the side,” he added. “Or you could use Betterment for the core of a core and satellite approach. In our experience, a lot of advisory firms haven't really thought that all through.”
Rich Cancro, founder and chief executive of Vanare, repeated the mantra that just building or attaching to a robo-platform will not get it done for most advisory firms.
“The most successful firms are the ones that are prepared for this, and are thinking about their value added, and their existing portfolio construction costs,” he said. “It's really difficult to take a direct-to-consumer model and adapt it to a model for advisers. From client to adviser, the whole stack needs to be digitized.”
Mr. Cancro added that the momentum is already in place and digital advice will become an inevitable reality.
“The idea that a human can do more than a machine and be more efficient is off base,” he said. “And the idea that a digital technology cannot be a fiduciary is wrong.”
