Advisors must cringe now and then when contemplating an iPad-wielding young executive logging on to an online investment site, opening a new account and e-signing documents while the advisor is working hard the old-fashioned way, his business seemingly falling by the wayside.
Well, cringe no longer.
A new offering called AutoPilot aims to provide advisors with their own private-labeled automated asset management engine to neutralize the robo-advisor threat.
A joint venture of CLS Investments, a third-party money manager and ETF strategist, and Riskalyze, which advisors use to generate a “risk number” and align portfolios with risk tolerance, AutoPilot will combine the two companies’ money management and analytics expertise to level the playing field between advisors and their high-tech competition.
“There are clients that don’t want a human financial advisor — that’s very obvious. This is a way to attract clients through a robo tool,” says Todd Clarke, CEO of CLS Investments, in a phone interview with ThinkAdvisor. “We’re trying to partner with advisors rather than compete with them.”
Clarke spoke with ThinkAdvisor on his way to T3, the annual advisor technology conference opening today in Dallas, where Clarke and his counterpart Aaron Klein, CEO of Riskalyze, plan to unveil the new platform, which advisors can begin using in April.
The two men plan to inform advisors in attendance that with the simple installation of an app that “literally takes seconds,” prospects and clients whom advisors draw to their sites can first take the Riskalyze questionnaire — a popular tool that has quickly garnered the affection of advisors managing $44 billion in assets.
Riskalyze’s pitch to advisors has been that once clients quantitatively grasp their risk tolerance, understand the risk level they need to achieve their goals and compare that with the risk level of their current holdings, they’re ready to sign an ACAT form.
“That’s the technology that we’re marrying with the asset management arm of CLS,” which Clarke says manages $6.5 billion in assets, using ETF strategies, mainly for advisors affiliated with independent broker-dealers. Advisors using Riskalyze are mainly RIAs, so AutoPilot aims to draw from both segments.
In arguing that the advisor population needs to embrace the latest technology in order to remain competitive, Clarke insists the current robo threat is merely the latest phase in an ongoing struggle.
“The independent financial advisor, their business model has been under threat for as long as I can remember: back in the ’80s, no-load mutual funds were going to replace the need for human financial advisors; then in the ’90s it was day traders; now it’s robos.”
“We feel strongly,” Clarke continues, “that in the end, that human business model of being independent, being fiduciaries, that that’s going to win. But to survive, [advisors] have to embrace the technology, the tools and resources available to them … Just because clients want to work with a robo doesn’t mean they don’t want a human to work with them.”
The CLS exec likens advisors’ competitive environment to that of CPAs in an age of TurboTax.
“TurboTax has not replaced the need for tax accountants, but TurboTax did change the way accountants work and service their clients,” says Clarke, who admits to feeling more at ease bringing a shoebox full of tax documents into his meetings with his tax advisor.
“The tax accountant doesn’t work with me with a ledger page and No. 2 pencil anymore. TurboTax has changed tax accountants’ roles from being processors to serving more as consultants.”
What that consultative role will be depends largely on the strategy advisors using AutoPilot choose themselves.
They can combine the use of their own branded automated service with as much or as little personal service as they want to add.
“They have the ability to work 100% electronically … if they want to, but we envision this as another way to improve the overall client experience,” Clarke says.
“A lot of advisors say they will use it for smaller accounts and there are a lot of advisors who say ‘This is fantastic; we’ll use it for everything,’” he says of the AutoPilot’s beta testers.
Clarke plans on aggressively marketing AutoPilot through a number of different channels.
“We have a bank of 3,500 advisors who use CLS’ ETF strategies; we will definitely reach out to them first,” he says, adding AutoPilot will also go after “the bank channel, the RIA channel, a lot of different places.”
The firm will charge advisors 25 basis points to manage the portfolios through the automated platform.
Venturesome advisors will need to figure out themselves how to market the offering to their prospects and clients.
The CLS exec expects advisors will seek to beat the robo-competition by offering clients the best of both worlds — high-tech automation combined with the human touch. And he warns advisors not to deny the changing competitive technological landscape.
“I hear many people say, ‘My clients are older and they don’t use technology.’” Speaking at an airport ahead of his flight to T3, Clarke notes that he sees numerous 60-somethings with iPads or Kindles.
“It’s amazing — older people are Skyping with their grandchildren; they’re looking at apps for their bank accounts.”
The other main segment of advisors Clarke speaks with — besides those who insist their clients aren’t interested online wealth management — are those who are all too aware they are losing accounts to high-tech firms — robo or otherwise.
“It’s ‘help me catch up with the latest technology so I can improve my client experience’ or ‘I’m fine doing what I’m doing’ — I don’t see a lot of anyone in between,” he says.
“What got advisors to where they are today is not necessarily going to get them where they want to go in the future,” Clarke continues. “Advisors faced with the threat of no-load mutual funds had to adjust how they were adding value to their clients. We feel those who don’t embrace the latest robo tools are going to go away.”
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