Robo-advisers demand attention

Planners should have technology upgrades in their sights, because these digital disruptors are changing what clients demand from their advisers — man or machine. InvestmentNews brought eight broker-dealer professionals together at the Technology Tools for Today conference in Weston, Fla., on Nov. 2 to discuss, among other things, whether digital advice is a threat to flesh-and-blood-advisers. "If the value proposition of the adviser is purely asset management or investment management, then I think they have some hard thinking to do about what value they provide," said Joe Simpson, director of information technology at Securities Service Network. "It's hard to justify charging 1% or 1.25% on those assets when you can get it for zero for the same basic functionality." Since March, Charles Schwab's retail robo-platform, Intelligent Portfolios, has charged clients 0%. Many others charge clients a fraction of a percent, much less than average adviser fees. Advisers will have to distinguish themselves from digital providers by helping clients with problems robo-platforms don't touch today, such as asset tilting, college savings, inheritance taxes and other concerns, said Darren Tedesco, managing partner for innovation and strategy at Commonwealth Financial Network. (More: Robo-advice is here to stay, and advisers must embrace it) Advisers also will have to add value through technologies they offer — and that will require improvements. For instance, Mr. Tedesco points out that robo-advisers such as Betterment allow a client to move money in about 15 seconds. To succeed, advisers will have to match that. "We're being pushed on the tech front, and that's going to be part of that value for everyone," Mr. Tedesco said. "Advisers are going to want to have these technologies available for clients." Automated advisory platforms, most of which are backed by venture capitalists or by large financial companies with big tech budgets, already have had a profound effect on how real-life advisers handle one important function: opening a new account. Indeed, robo platforms — many of which allow clients to open accounts in minutes — are putting pressure on advisers and their broker-dealers to allow clients to open and fund accounts quickly. Financial advisers will need to make the experience easy and efficient for clients because that's what they get from robo-platforms, which provide 24/7 account access and basic functions nearly immediately, said Brian Emde, director of platform strategy and product deployment for Voya Financial Inc. Essentially, advisers need to leverage robo-technology themselves to serve their clients, particularly younger investors who expect such an experience in all aspects of their lives, he said. (Related read: The robo-advisers to look out for in 2016) Firms need to be able to engage clients in the ways clients want, and if that's 100% digital, the platform needs to provide that, Mr. Emde said. The goal is to grab hold of clients before they have earned or inherited much wealth in the hope of retaining them as their portfolios and advice needs mature. "If you can get the client relationship in place, then you're more apt to see that wealth when the transition happens," he said. Advisers have to stay on their toes, though, to make sure clients they are serving with automated platforms come to them when they are ready to advance to live financial planning help. James Clabby, chief information officer at AIG Advisor Group, said advisers can't just sit back and wait for these young clients to mature. They have to cultivate the relationship. "You have to water that participant base constantly so when they're ready to roll, and start, you'll gather that wallet," he said. Regular communications and reaching out to clients are key, and it's something that technology increasingly can help advisers accomplish efficiently. For instance, providing information like account alerts and services through mobile phones are a great way to reach out and touch clients, because people have such a strong emotional tie with their phones, said Aaron Spradlin, chief information officer at United Planners Financial Services. Consider how much more frequently clients check their financial accounts now that they can go online and do so whenever they want, as opposed to only looking at them when account statements appear in the mail. "These innovations are creating opportunities to create even a stronger bond and a stronger relationship with the clients they have, than they've had in the past," Mr. Spradlin said. Fearing technology is useless for advisers. They need to be open to using these new ideas to make their practices better. Mukesh Mehta, chief information officer at Cetera Financial Group Inc., agreed that digital technology enables firms' touch points with clients. It also should be leveraged to put more financial tools in the hands of clients. The industry so far has focused most on providing technology to advisers, but next-generation investors are very tech-savvy, and firms eventually will have to provide the tools directly to clients, he said. "This is just a natural progression to give more tools and technology to the individual investor, and let them progress to an advised channel," Mr. Mehta said. (Continue reading: More on digital disruption in the advice industry)