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Practice Management > Building Your Business

The robots are coming; advisors, niche now

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Remember the milkman?

When is the last time you communicated directly with anyone to discuss the milk needs of your family? It’s probably been a long time.

Why? Because the business changed; grocery stores began appearing in every community and the process of buying milk changed forever. Milk became a commodity.

The latest trend in our industry is that of the robo-advisor. This has become enough of an issue that advisors across the country are starting to stand up and take notice.  

Online firms like Wealthfront, Betterment, Jemstep and others have built a new mousetrap for anyone willing to invest in this new-aged idea. Driven by market analytics, these firms stand to revolutionize the advisory business in much the same way that refrigeration changed the milk business.

Market knowledge was once exclusive to the well-heeled broker. Access to highly-guarded information of markets and investments has now become the commodity. Using market information as fuel, computer programmers run machines that relentlessly drive the cost of building a portfolio closer and closer to zero. The savvy investor benefits by paying lower and lower investment advisory fees. So where do we fit in down the road?

Successful dually-licensed advisors have been frantically building their fee-based investment businesses, in order to offer less biased advice to a clientele who has grown tired of product salesmen. Clients have been hearing and responding to a message that has them eager to pay a percentage of assets for the management of their accounts. But what happens when those very fees are discounted by the machines that build well-diversified portfolios for lower fees? Does the fee business not suffer a fate similar to the travel agent, auto insurance, and milk delivery businesses?

Here are a few of the options I have seen presented for dealing with the robo-advisors:

  1. Don’t worry about it. After all, these services appeal only to younger tech-savvy clients with very little money. Your clients are all too wealthy and too old to be lured in by such a novelty.
  2. Embrace it. Align your practice with a robo-advisor so that you too can offer a low cost, high tech service to a broader base of clients. In other words, make everyone your client and utilize the low cost solution to only those clients who would “get it” and enjoy lower management fees.
  3. Sell your practice and get a job with one of these firms, getting in on the ground floor. Yes, that was suggested in a well-known industry publication. If you can’t beat ‘em, join ‘em.
  4. Wait and see what happens. This translates roughly to: bury your head in the sand and hope this fad fades away, and quickly.

While each of these suggestions may work for some, I would like to offer another option to consider. I believe that we can transcend the issue by reframing the problem.

the robots are comingAsk yourself: “What business am I really in?”

If the answer contains the words low-priced investment management, you’re in trouble. The robots are coming for your clients and they don’t care how long you’ve been in the business.

Instead,  consider who you serve and why you serve them. What unique attributes do you – and only you – bring to your clients’ lives? If you were unable to serve them any longer, what valuable service, process or attribute would they miss most?

When we get really clear on who we are and what we are uniquely wired to do for the families we serve, we are better able to manage a disruptive technology such as the robo-advisor movement. When we tightly define the niche we serve, we move from being a product or service provider and step into the role of advocate. When we stand tall as an advocate for those we serve, we avail ourselves to see robo-advisor platforms as what they are: tools that can be incredibly valuable for the right purposes.

Last word on the milkman: if you Google “milk delivery service” you’ll find a host of niche businesses that continue to provide incredible value to a huge market of people still in love with fresh milk and personal service.  There’s still hope for advisors who become really clear on who they are and why they got into this business in the first place.      


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