From the September 2015 issue of Research Magazine • Subscribe!

Will Robo-Advisors Be Good at Relationships?

Staying competitive will require some very human skills

Harry Campbell/© Harry Campbell/©

What can financial advisors do to stay relevant amid the growing availability and sophistication of robo-advisors? In contemplating that question, consider the strange story of ELIZA, a computer program developed in the mid-1960s.

Programmed by MIT computer scientist Joseph Weizenbaum, ELIZA simulated a type of psychotherapy that emphasized open-ended questioning. A person might type, for example, “I am feeling nervous” and get a reply from the computer such as “Do you believe it is normal to be feeling nervous?”

This project was intended as an experiment in computer processing of everyday language. Yet to Weizenbaum's surprise, the program often got people to reveal a lot about their emotions and concerns. Some users seemed more comfortable opening up to ELIZA than they might with a human therapist.

Bear in mind that this was half a century ago; at just a few thousand lines of code, the robo-therapist was primitive by today's computing standards.

Weizenbaum, who died in 2008, spent his later years as a cautionary voice in computer science, warning that people might become overly reliant on technology. Nevertheless, ELIZA spawned increasingly advanced versions, and some are now offered in earnest as tools for dealing with psychological problems.

For financial advisors, the above story may be disconcerting. An advisor's ability to form relationships is increasingly cited as the key to retaining clients against competitors, including robo-competitors. But as ELIZA and its successors have shown, people sometimes will be attracted to having a relationship (or what seems like a relationship) with a computer instead of one with a human.

Underrated Humans

For advisors eager to understand what it takes to be competitive in the advice business (and other fields) as computers take on a growing array of tasks, I recommend a new book: “Humans Are Underrated: What High Achievers Know That Brilliant Machines Never Will,” by Geoff Colvin, senior editor at large of Fortune magazine (the book is published under the imprint Portfolio/Penguin).

The skills that will be valued in the workplace increasingly will be those of human interaction, in Colvin's view — abilities to work in teams and to understand what other people are thinking and feeling. “Being a great performer is becoming less about what you know and more about what you’re like,” he writes.

The “newly valuable skills” are those of “empathizing, collaborating, creating, leading, and building relationships,” according to Colvin. Organizations focusing on such skills range from Google to the Cleveland Clinic to the Navy Fighter Weapons School (known as Top Gun), in examples he cites. Understanding people is crucial in the whole range of human interactions, including ones as hostile as an aerial dogfight.

However, Colvin acknowledges, building such skills may be challenging. Women might find it easier, on average, to do so, he argues, though he also notes that there is enormous variation within genders. “Life will be increasingly tough” for relatively asocial people who once might have held “solid middle-class jobs in factories or back offices.”

He also makes an interesting, counterintuitive case that participation in social media can be detrimental to forming connections with people, as the interactions are often superficial. He cites research suggesting that people who spend much time on social media experience declines in empathy.

Mixed Skills

For financial advisors, Colvin's overall thesis is good news, as it suggests limits to the risks of being automated out of a job. Robo-advisors, in this perspective, will not satisfy for most clients the deeply rooted human tendency to connect with other people; nor for that matter will robo-therapists.

Granted, a computer might be programmed to detect changes in facial expressions or voice tones, but unless it has its own feelings, its engagement will be limited and impersonal. (Colvin assumes that robots that are indistinguishable from humans will not emerge in the lifetime of his readers or even their grandkids. If that does occur, he points out, far bigger issues will arise than job displacement.)

None of the above, however, should be cause for complacency. As Colvin points out about the skills he describes: “Developing those abilities will not be easy or comfortable for some, and it will likely get harder for everyone, because as the abilities become more valuable, standards will rise. Even those who are good at them will have to get better.”

Another challenge is finding the right proportions of “what you know” and “what you’re like.” Imparting information and knowledge from one person to another is often central to a relationship. Clearly, an advisor who spends much of each day at cocktail parties and golf courses would risk spending too much time interacting with people and too little developing a basis for informed advice.

If a future advisor is simply a schmoozing “front person” channeling directives from a robo-advisor in the back, clients will see through the charade. To deal with such conundrums, advisors will need to develop mixtures of technical and interpersonal skills in order to carve out unique selling points to attract clients.

Colvin makes an interesting suggestion that the trends he describes may brighten the prospects for humanities majors, despite the growing enthusiasm in recent years for science, technology, engineering and math (STEM) studies. The humanities might be better than STEM fields for building interpersonal skills.

Yet “the most valuable people of all will be those who combine technical knowledge with the skills and sensibilities built by study of the humanities,” Colvin writes, citing Steve Jobs as a prime example.

Math Lesson

An experience of mine early this year provided some insight into just how entwined personal and technical skills can be. I was taking a popular online course titled “Introduction to Mathematical Thinking,” taught by Stanford mathematician Keith Devlin. My fellow students numbered in the tens of thousands worldwide. The course's goal was to give a sense of how mathematicians think and work.

While math might seem to epitomize a technical subject, interpersonal skills were crucial. The professor encouraged students to form and join study groups, which met online or off. The coursework put considerable focus on writing proofs and evaluating proofs written by other students — exercises in communication as well as analysis.

I have taken some other math courses online that did not involve anything like the same degree of personal interaction, and I learned less in them.

Incidentally, there have been advances in recent years in automating some mathematical proofs. No computer has ever decided what it wants to prove, however, or how best to communicate its conclusion. Robo-mathematicians, robo-advisors and robo-therapists may have a future, but humans seem likely to dominate those fields for a long time to come.

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