Close Close

Technology > Marketing Technology

10 Best Ways to Compete Against Robo-Advisors

Your article was successfully shared with the contacts you provided.

Technology has taken over almost every aspect of life, from eating to driving cars. While client interactions are the bread and butter of the advisory business, robo-advisors are muscling their way in. Fox Financial Planning Network (FFPN) has released a white paper that shows how advisors and firms will need to change in order to compete with these online investment platforms.

“The new, low-­cost competition from online advice platforms [is] providing the industry with a ‘wake-up call’ to evolve their firms,” said Deborah Fox, CEO and founder of FFPN, in a press release.

“The good news is there is an incredible opportunity for firms to defend — and actually improve — their industry position by focusing on building efficient infrastructure that delivers a consistent and outstanding client service experience with well thought out systems, adoption of best-in-class technologies and clear pricing and client communications,” Fox said.  “These are all the things firms should have already been working on; so if the robo- advisors serve as a catalyst for firms to get into gear to do what’s necessary to evolve, more power to them.” 

FFPN laid out 20 battle strategies for advisors. Here is a condensed list of 10 Best Ways for Advisors to Compete Against the Robos:

Become an expert at clearly articulating your value.

1. Become an expert at clearly articulating your value, and define your clientele.

If the client knows exactly what skill set you have to offer, you are automatically differentiated from online platforms. Personal service, then, becomes sort of a white-glove premium. “Articulating value comes down to effectively communicating how you are going to solve your prospects’ problems, significantly improve the status quo or handle the parts of their financial lives they choose not to,” the authors write. 

By having a clearly defined client profile, you’re able to tailor the services you provide. The authors say that by not defining your audience, you open up the door for lower-cost robo-advisors to sweep in and steal your clients. 

Specialize, and make your specialty known.

2. Specialize, and make your specialty known.

According to a Cerulli study, only 15% of advisors are specialists, and you can use that low percentage to your advantage. Robo-advisors can’t compete (yet) with advisors who specialize in categories like alternatives, complex fixed income and exchange-traded funds.  Becoming an expert in a certain field, you incerease the chance that clients seeking specific expertise will proactively seek you out. 

Add other areas of financial advice.

3. Add other areas of financial advice by enhancing the investment management services you provide.

Providing additional areas of advice to your target audience means adding more value. These areas should make the lives of your clients easier by assisting them with their problems or with making certain decisions, the Fox paper explains. The bottom line? The more your expertise is valued, the more your service is worth.

Embrace social media. (Photo: AP)

4. Embrace social media.

Many advisors have not caught up with the social media trend. This might seem odd since almost every person and business has gone digital, but this is a marketplace that many advisors forget about. Even if you’re not social media inclined, the Fox report suggests makine small changes such as tying in your LinkedIn profile with your website or blog. “Speak in your own voice and let your business and planning philosophies shine through in your writing. If you don’t have time to write your own content, outsource that job,” the report said.  “It is one of the highest return on investments you can make because the majority of all worthy prospects will go online to research an advisor they are considering doing business with.”

Deliver 70+ touches per year.

5. Deliver 70+ touches per year, and use technology to facilitate them.

In order to remain relevant and be remembered, these touches are very important. Set up reminders to use email alerts, cards, newsletters or calls. This is one way that the use of one technology can be an asset to utilizing another. 

Lower your AUM fees.

6. Lower your AUM fees and add an annual retainer.

It’s inevitable that most advisors will have to lower their AUM fees in order to compete with other firms. “You may know your value is there, but it is not transparent to your client in a bundled AUM fee,” the authors write. They suggest setting lower AUM fees and then charging the investor an annual retainer fee. This fee will help to compensate the advisors for other wealth management services they provide. Another benefit of adding this retainer is that it will help even out the cash flow during time periods when securities markets are declining.

Hold one social and one educational event each year.

7. Hold one social and one educational event each year.

Hosting social events will help you further develop your relationship with clients, and they are a good way to network with other potential clients. Host an interactive event, such as a cooking class or a wine tasting; just make sure that the event caters to the interests of your clients. Educational events are always important, too, as they can provide your clients with knowledge and advice and they’ll start to see you as a source of expert information. 

 Partner with a robo-advisor that caters to advisors.

8. Work with a robo that offers services for advisors.

If you can’t beat ‘em, join ‘em, right? Robos provide cutting-edge technology that can automate many aspects of investment management. It would only make sense that advisors leverage that technology. These tools might be useful for client assets invested in passive portfolios.

But remember that due diligence needs to be done in order to find the best fit for your firm. It’s also important that you communicate with your clients your importance in monitoring changes and positioning weighting and leverage — the robos can’t replace the human touch. 

Don’t forget Gen X and Y.

9. Don’t forget Gen X and Y.

The Fox report estimates that $30 trillion will be transferred from baby boomers to the next generations starting in the next 30 to 40 years. Advisors should start paying attention to Generation X investors. Many shy away from this group because of their smaller portfolios, but Fox believes this is a huge mistake. Gen Xers are also more likely to be tech-savvy and be comfortable working in an online environment.

Firms should hire advisors from Gen X and Y, too. These younger advisors could help the firm lure and understand younger clients, and could help get the firm up to speed with the newest technology (for example, a robo-advisor’s online advisor platform).

Create incentives to put clients first.

10. Create incentives to put clients first.

The Fox plan suggests that you should put clients first and then build your business model, strategy and employee strategies around them. “Instead of raising everyone’s base salaries over time, consider paying a fair salary with an incentive plan with measurable benchmarks layered on top,” the authors wrote. “This provides each person with the potential to earn well above their previous salary level by helping your firm grow and increase profit margins.” Incentives should be based on how well an employee can satisfy clients in their assigned roles. 

More slideshows on ThinkAdvisor:


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.