Don’t Fear the Robos, Advisors Can’t Be ‘Bot-Sourced’

LPL’s chief investment officer rebuts talk of the robo-threat at San Diego gathering

Can advisors be replaced by technology? No way, LPL's Burt White says. Can advisors be replaced by technology? No way, LPL's Burt White says.

A study by Oxford University researchers marks financial advisors as vulnerable to robotic replacements, a conclusion that was exposed to strong rebuttal at LPL’s annual gathering in San Diego.

Addressing a general session attended by thousands of the firm’s affiliated advisors, LPL’s chief investment officer Burt White looked under the hood of the 2013 study which found that 47% of all U.S. jobs could be “bot-sourced,” or computerized, within the next 20 years.

The job of financial advisor fell somewhere in the middle in terms of risk of replacement among some 700 occupations under study, with telemarketers given a 99% risk of replacement and recreational therapists the least, with a .03% risk, according to the study.

Citing the study, White said the barriers to bot-sourcing were dexterity (robots don’t have fine motor skills); caring for people (robots are indifferent to people); and originality (robots just follow programming rules).

For that reason, he said, it was easy to see why referees — given a 98% chance of replacement — were at risk of job loss: dexterity is not needed, they “clearly don’t care about others,” he joked, and the job doesn’t require originality but rather just following rules.

Conversely, surgeons must be dexterous, care about others and think creatively, so their virtually nonexistent .04% vulnerability to job loss makes sense, he said.

Speaking from a broader economic point of view, White says we need not fear a time when half of Americans will be unemployed.

He noted that in the late 1800s, most working Americans were farmers, yet only a few decades later the same process of industrialization that forced 30% of them from their jobs spurred the development of higher paying factory jobs.

Citing Kondratiev wave theory, which postulates the regularity of boom and bust phases of business cycles, White said that “where you drop into the wave matters — ask any surfer,” noting the desirability of catching the wave early in order to ride it and the probability of wipeout when catching it late.

“The waves are getting close together; the distance from cutting edge to obsolete doesn’t take very long anymore,” said White, who took solace in the fact that the U.S. remains the economy best poised to stay in front of tech trends.

And yet he expressed concern that people are working longer, productivity is declining and the wage gap between skilled and unskilled laborers is currently at an all-time high.

The most “understudied” aspect of the labor force participation rate, he said, is the number of people 55 years and older staying in the work force.

“The expected retirement date is moving higher by four months a year; incomes haven’t risen… after inflation; incomes haven’t budged in almost 20 years; people weren’t prepared for two recessions,” and at their own peril, he added, they have been overly cautious about getting back into the market.

“We’re working employees harder than ever,” he continued, yet at a time when profits are up 42%, payrolls are up just 0.2%, meaning that workers are carrying the load but not seeing the rewards of their toil.

Companies, meanwhile, are not reinvesting profits in productivity-enhancing plants and equipment but are rather just buying their own shares back.

On top of these harsh trends that make advisors more necessary than ever, are we now to match the rarity of “made in America” labels with a dearth of “made by human” labels?

Emphatically no, at least in the case of financial advisors, the LPL investment exec protested.

“This study gets it wrong,” he shouted. “You’re all about caring about others.”

And given all the new tech tools advisors are constantly employing, “the next time you hear ‘robo-advisor’ [mentioned], answer ‘Yes, I am the robo-advisor,’” White quipped.

The LPL exec reminded his audience that advisors have been down this road before many times.

In the dot-com boom, investors thought they could invest for themselves at E*Trade. When the boom went bust, they came back to advisors.

Then, in the last decade, people were saying, "Why are you investing in stocks? You should be buying condos."

Real estate went way up, then way down again, he said, adding that now people are talking about robos.

“They’ll come running back to you,” he predicted.

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