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April 23, 2015 at 07:17 AM
Financial advisors are confused about robo-advisors. “They’re not sure if robo-advisors are their enemy, friend or frenemy,” says Todd Clarke, CEO of CLS Investments, a $6 billion third-party money manager that partners with thousands of advisors.
Clarke was talking about the results of his firm’s survey of 134 independent advisors designed to gauge their view of the growing robo-advisor market. As of year-end 2014, robo-advisors had about $19 billion worth of assets under management, a fraction of the roughly $2.4 trillion managed by RIAs.
Close to 80% of the survey’s respondents said they perceived robo-advisors as a “potential” or “significant” threat to their business, but 97% said they believed that human advisors and robo-advisors could coexist. More specifically 34% said robo-advisors could help their practice while 21% said it could hinder it. Forty-five percent saw “no discernible impact.”
Asked whether they would trust a robo-advisor as a partner to help manage and oversee assets, 60% of advisors said yes, and 40% said no.
Clarke says the growing presence of robo-advisors will be the catalyst that pushes advisors into embracing more technology in their practices, but he doesn’t expect robo-advisors will replace financial advisors. Advisors will still do financial planning, for example, but more will do that online rather than in person, sitting at a desk across from their client, says Clarke. And just like TurboTax and other online tax software didn’t replace accountants, robo-advisors won’t replace human financial advisors, says Clarke.
