3 reasons robo-advice will benefit advisers

By Daniel Gara-adviserlogic ·
December 22 2015

3 reasons robo-advice will benefit advisers

In the same way that medical websites are not replacing the medical profession, robo-advice is not replacing the financial advice profession.

Medical websites help inform people about potential health issues. What you'll often realise when doing online research is just how much you don't know. Something like conscious incompetence. This is the point where you are motivated to seek expert advice (whether it be medical or financial).

It is, however, fair to say that robo-advice does more than just inform. Robo-advice walks people further down the path of self-diagnosis and marches them towards implementation.

Robo-advice can, for example, recommend asset allocation and place investments. However, advisers who have deeper coaching-style relationships with their clients have long provided execution services just on an ancillary basis - it's not been their key value proposition for a long time.

This means robo-advice is not terrible news for advisers - it is great news, for three distinct reasons.

Consumers with simple needs

Advisers who have clients or prospects with simple needs are often faced with a dilemma around how and what to charge for their services. These prospects actually represent a cost to advice businesses, but many advisers feel honour-bound to help them.

Robo-advice takes this dilemma away because consumers with simple needs can now access websites that leverage robo-advice and implement simple solutions on their own. Robo-advice therefore saves the adviser and the consumer time and money.

Consumers with sophisticated needs

Consumers with more sophisticated requirements can use robo-advice tools to educate themselves and gain some insight into what their issues may be. However, when it comes to final selection of strategy and product, implementation and maintenance, they'll rely on their trusted financial advice professional.

With a little luck, these tools will also encourage the majority of consumers who aren't currently advised to seek out a qualified adviser.

Efficiency gains

The third benefit is the efficiency gains advisers can derive from using robo-advice tools within their own practices.

Robo-advice is a collection of human-set algorithms that analyse data and provide advice. Of course, every client is different. However, you're still the same. So, the reality is that you're going to apply the totality of your experience, knowledge and education to each of your client's situations.

Robo-advice just helps you systemise and speed up that process. This, in turn, frees you up to help more people and spend more quality time forming relationships with your clients, rather than doing manual compliance work in the back office.

There have been a lot of articles in the past debating whether robo-advice is a threat to the adviser and the traditional advice industry or not. The answer is not.

Robo-advice should be viewed as an opportunity for advisers to demonstrate their value - robo-advice, while effective, can still only do so much.

Automated advice should be viewed as an enabler; if a client can't find an operational solution after engaging with robo-advice, then their only option is to seek out an experienced financial adviser.

So, everybody wins, right?

Daniel Gara is the head of product development at AdviserLogic.

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3 reasons robo-advice will benefit advisers

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