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Episode 1: To be or not to be a robo-advisory practice

October 22, 2015 @ 4:48 pm

Runtime: 4:52

Over the past five years, robo-advisers have taken the financial services industry by storm. Are they a threat to the average adviser, or an opportunity? We invaded a small practice in Raleigh, N.C., to give them a practice makeover — robo-style.

The Renovation Room

Industry experts and executives offer strategies, tips and ideas on how practices can improve their business.

Vanessa Oligino

Vanessa Oligino

Director, Business Performance Solutions, TD Ameritrade Institutional

“Robo solutions are a hot topic in today’s industry. While there are many opinions regarding whether they are friend or foe to the advisory community, there is no denying the success robo solutions have had in recent years. We challenge advisors to ask themselves “why”? Rather than view robo solutions as a threat, we help advisors understand the appeal and capabilities of the model and how they can implement specific aspects to increase their scalability and better engage diverse investor segments.”

“Many advisors have concerns with the model given that it seems to be in direct contrast to the holistic financial planning services advisors provide to their clients. While on the surface that may be true, the challenge for many advisors is to understand what the technology can do and then re-imagine how their firm can operate by leveraging it.”

“For example, online advice solutions can open up an opportunity to cost efficiently serve those clients with less complex needs. Another example is automated rebalancing which can be a huge efficiency gain. Yet a third example is an easy, paperless online account opening process.”

“Change can be difficult, specifically when a firm is looking to implement a radical change in service delivery. However, it can be managed so that those impacted embrace it rather than feel threatened by it. However, with careful planning and a detailed implementation plan, robo solutions can enhance an advisor’s ability to serve more clients and enhance the breadth and depth of solutions offered.”

Matthew Halloran

Matthew Halloran

President and Founder of Top Advisor Coaching

This is one of the things I look froward to every year, Matt Ackermann’s team at Investment News creating another Practice Makeover. All four seasons have been fantastic and only getting better. There is a lot to learn in each of the seasons for advisers and team members alike. This season is timely and covers an issue that is on every advisers mind, ROBO’s.

One thing I hope the advisers do is define what they mean by ROBO. There seems to be a lot of anxiety surrounding an idea that is so lovely defined. Is it just a client portal? Does the robot make decisions? Does the robot service the clients in an automated fashion?

I love the team dynamic already. Every office needs to understand that there needs to be very different people who do different things in the office. If it works, as it seems to in this office with Matt and Nina specifically, they have unlimited potential for growth (it seems they have done a pretty good job already!)

This season is going to be fun. What is in store for this office? Can’t wait to find out.

Frank Maselli

Frank Maselli

Founder of The Financial Lifeguard Academy and The Maselli Group

Adding a “robo” platform to a relatively young but growing practice could be a blessing or a costly distraction. Frankly, I’m not even sure how you would implement it but more basically my question is… “Why? What’s the benefit of robo to the practice and ultimately to the kind of clients they want to work with?”
I’m as far from an analytical person as you can get, but Nina’s desire to “just try it” strikes even me as impulsive and unfounded. “Robo” isn’t simply a new software program that you bolt onto an advisory practice. It carries a big message that says to the investor, “you don’t need a live advisor.” While that may be appealing to many younger investors, it’s not really what we do or what our clients want.
Managing wealth today is a process that transcends robo algorithms. As professionals, our value is in helping people navigate complexity in the real world. Listening, caring and managing client emotions is infinitely more important than managing money.
Can human advisors and robots co-exist? Sure, in fact, we have the same analytical tools and use the same basic portfolio construction methods as in any robo platform. But we add many other elements that are more vital and cannot yet be duplicated by silicon chips.
As Spock said to Kirk, “Computers make excellent and efficient servants. But I have no wish to serve under them.”
I think Matt and Nina would be better off focusing on accelerating their growth curve with the kind of investors that appreciate their caring, personal and analytical approach. If they want to use enhanced technology to improve their services, I’m all for that. And by all means talk about it and make modern technology part of your brand identity.
Spending a lot of time and team energy on incorporating some kind of robo platform is not the best use of resources at this point in their development. I’d rather see them build a solid marketing effort, create some brand awareness and develop a strong referral system to get those assets up.
That challenge is not only stimulating and rewarding, but it’s much more aligned with the more critical value we human advisors provide.

Joseph V. Maugeri

Joseph V. Maugeri

Managing Director, Corporate Relations, CFP Board

When looking at big decisions for a practice, it’s important to not just ask questions, but to ask the right questions. Asking only whether or not to implement robo advisor technology doesn’t address exactly what problem they are trying to solve. Maybe a better question is, “How can we use technology to better serve our clients and grow our practice?” By rephrasing the question, it allows the firm’s owners to see technology as a solution rather than a chore. It also forces them to address exactly what problem they are trying to solve. For example, do they want to grow their practice by serving more mass market clients? Or, do they hope to work less hours each week?

Robo advice can be seen as both a threat and an opportunity. If traditional advisor services – such as portfolio construction – are now being automated, they could become commoditized. The next logical line of questioning is, “What is the value proposition of our practice? Why do our clients choose us over our competitors? How are we different?” If their expertise is portfolio construction and management, do they need to make a change? In this way, using a robo platform to serve a different segment or to scale their practice might allow them to concentrate their resources on value-added services, such as providing a wider range of financial planning advice, as opposed to only offering advice on portfolio construction. They need to evaluate the robo option in terms of how it will free up time to provide more holistic advice where final outcomes become more of the focus of their client conversations. In this sense, it may help them re-establish or reinforce their value proposition to clients and prospects.

Next, they should evaluate their client base. Are their current clients comfortable with technology or do they prefer face-to-face interaction? These are the pros and cons that need to be considered. If their most profitable clients are technology-averse, they could risk losing those clients, should they move to more automated services. On the other hand, these automated services could open up new market segments for the practice. This new technology could attract prospective clients that prefer getting most of their information online but like the ability to call an advisor for more complicated questions or issues. The robo solution could potentially expand their client base in this way. Analyzing how their current and future clients will react to this change should be considered in their evaluation.

The last area they need to address is when to implement. Is this the right time? It is clear that the robo advisor market, while still small, is rapidly evolving. Big players are either developing their own platforms or buying up smaller players. Will waiting a year produce better options for the practice? Waiting might be preferable to making a large investment now that could be hard or costly to unwind later. Many advisors have experienced this with financial planning, CRM or portfolio management platforms. Once they decide that a robo advisor is the right choice, they need to decide if a “wait and see” approach might allow for a more robust and cost efficient option in the near future. They should also decide what criteria will determine a go/no-go decision, and if those criteria are met, the practice will pull the trigger.

Kelly LaPalio

Kelly LaPalio

Vice President of National Accounts, FocusPoint Solutions

The question of whether to utilize a robo advisor is a really timely and compelling topic that many advisors are considering at this point in time.
It can be daunting to incorporate not only new technology, but also a potentially different (or at least tweaked) investment philosophy/approach at the same time. There are so many areas of a financial planning business—operations, reporting, staff responsibilities, client meetings, interactions, and expectations, etc.—that would be impacted by such a change.
It makes sense that Matt wants to dig deeper to determine whether a robo advisor is the appropriate solution for his and Nina’s practice. The team at Archer has clearly been incorporating a recipe for success since 2005, and today they’re ready to take things to the next level by seeking to bring in a new wave of young families as they expand their client base.
For many reasons, but these in particular, it seems especially important that both advisors and their valuable team members feel comfortable, confident, and passionate about integrating a robo advisor into their business model (or not). I’m very interested to watch the decision-making process at Matt and Nina’s firm unfold throughout this series.


Your Practice Partner

Valuable information and assets provided by Broadridge Financial Solutions, this season's sponsor of Practice Makeover.

Prosper as a Breakout Advisor

The principals of Archer Investment Management, based in Raleigh, NC, took notice when robo-advising achieved triple-digit growth over the past year. Now they're tackling the critical question that's on the mind of today's advisory firms: is robo-advising right for me?

Defining and driving success

Matt Archer and Nina O'Neal are excited. They clearly see robo-advising as a fit for their young, forward-thinking business. However, as we listen to this conversation, it's clear that some vital questions remain. Perhaps the most critical: “How will you define success—and what measurements will drive it?”

A framework for strategic thinking

It's estimated that as many as 18% of RIAs* are planning to add robo-advising services to their firms over the next two years, and this episode provides great perspective on why this should be viewed as much more than a simple go/no-go decision. It also outlines key strategic questions you'll want to ask whenever you're weighing any new service or technology.

Technology and Relationships: Finding the Right Balance

As a financial advisor, you're in the relationship business. Like Matt Archer and Nina O'Neal of Archer Investments, you've built a practice based on credibility, respect and trust.

Robo-advising and other services

In Episode Four, Archer Investment's Nina O'Neal and Matt Archer meet with technology expert Aaron Klein. He provides guidance on specific functions, parameters and tiers of service, and that prompts Nina to push back.


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