The financial planning industry has found itself under fire once again. Same song, different verse. However, while the enemy is new, the battlefield is not. Over the years, financial advisors have been attacked by no-load mutual funds, discount brokerage houses and day traders, all of whom are trying to replace the client’s need to interact with advisors. This time, the threat is robo-advisors.
Once again, in order to survive, financial advisors will need to reinvent themselves. To do this, it is critical that advisors stay agile and change their value proposition to remain competitive and relevant.
New Value Proposition: Helping Clients Change Behavior
Prior to the robo-advisor threat, human advisors could add value by simply building solid, asset allocation portfolios. Now, human advisors must go well beyond portfolio construction and trading alone.
In order to compete against robos, the value proposition must be refined to focus back on the human interaction and relationship. Advisors who focus on helping their clients change behavior will not only survive, but also thrive. Having difficult discussions about saving and spending habits, as well as the need to work longer while investing at the appropriate risk level, will have huge impacts on the client’s ability to reach his or her financial objectives. These hard-hitting discussions can only be done human to human. Advisors who refine their value proposition to one of helping clients change their behavior are the most likely to survive.