Failing to market a robo properly can mean wasting big bucks

Many industry executives have come around to the opinion that it is almost imperative for advisory firms to offer a robo-adviser to clients who are increasingly demanding more sophisticated websites and apps.

An online automated investment platform has the potential to bring new types of clients to a firm, but according to a study by wealth management marketing consultancy Kaleido, a robo-offering could also hurt a firm’s bottom line if not advertised properly. Most clients and prospects won’t seek out a new product or service, so it’s up to the firm launching the robo-adviser to get the word out.

For advisers to hit the jackpot with their robo offering, they need to segment their current and prospective clients and market it to each group differently.

“You have to think about what your target client is,” said Angie Herbers, co-founder of Kaleido. “When we determine their needs … we will look at all platforms and pick the platform most effective for that type of target audience.”

Ms. Herbers said that Kaleido has found that advisers usually implement and then market their robos all wrong.

“They pick their platform and try to make it work for the target, which is just the opposite of how you should do it,” she said.

Advisers are slowly adopting robo offerings in an effort to ramp up their digital presence and respond to investors’ wants and needs. In the 2015 InvestmentNews Technology Study, 3% of the 234 advisers surveyed said that they currently offer some sort of digital-advice service. When asked if they plan to offer robo-advice in the next six to 12 months, 11% said yes.

Client referral rates for advisory firms have dwindled to about 23% per year, from about 36%, and closing ratios are declining as well, to about 50% of prospects, from about 70%, according to the most recent Kaleido study, which suggests that this could be the result of underpricing services or overcompensating on a number of services that some clients may not need or want. Kaleido conducts its surveys everything three months.
In some cases, advisers may be risking the quality of their services by focusing on the wrong areas. And when that happens, clients are less likely to recommend the adviser, the study stated.

Michelle Mosher, a marketing specialist for financial advisers at practice management firm Ironstone, said that in order to remain competitive, advisers need to be conscious of their clients’ differences. They can do so by communicating with their clients and prospects about the types of services that they’d like to receive.

“It is important for advisers to segment beyond the traditional means,” Ms. Mosher said. “So go beyond the demographics and the age and the assets under management. [Instead], segment based on how they want to be communicated with.

“Really get to know them,” she added.

According to the recent Kaleido white paper, “X-Cell: The New Frontier of Advisory Client Service,” after advisers identify the types of clients with whom they want to work, they must determine what services they want to offer their clients and how these services will really help.

“It is important for advisers to understand when adding any service or technology, they need to do their research and make sure it’s actually serving client needs,” Ms. Herber said. “There’s a lot of knee-jerk reaction right now about integrating robos into advisory firms.

“It is something of the future, but not something they have to rush to do,” she added.

There are many white-labeled robos out there that could complement an adviser’s practice. The features of each platform varies to some degree, including tax-loss harvesting and retirement calculators, the types of investment products offered, what other vendors are integrated and the ways that advisers can use them to manage client portfolios.

Marion Asnes, president of marketing consultancy firm Idea Refinery, said that advisers should not forget the one cardinal rule though: Don’t get too caught up in the offerings, because in the end, it’s always about the quality of the advice that the clients receive.

“Financial advice is a service business, and every client deserves to be served as well as you can within reason,” Ms. Asnes said. “Your message should be that you are using this technology to streamline the process you have already begun and are [instilling] your intellectual process into the technology.

“What you don’t want is to imply you’re counting on algorithms to provide an investment strategy,” she said.