Robo-advisor or human advisor — the idea that an investor must choose one or the other is a myth, according to research released in December by Cerulli Associates.
According to the December edition of The Cerulli Edge, the very name robo-advisor is deceptive, as most platforms offer some level of communication between investors and representatives.
“There is a misconception that digital advice means no human interaction between the customer and the firm delivering the advice,” Tom O’Shea, associate director at Cerulli, said in a statement. “In truth, Cerulli has found that even the most automated advice platforms allow a consumer to reach a representative through a toll-free number or online chat.”
Furthermore, as big players like Schwab and Vanguard have entered the robo space, they’ve allowed investors using their digital offerings to interact with advisors as well, Cerulli found.
The firm expects this trend to continue, with retail firms using digital advice to scale their relationships with clients. By shifting the burden of portfolio construction to the investor through the digital platform’s algorithm, retail firms build efficiency into the portfolio construction process.
“As retail direct firms embrace automated advice, the convergence between human and digital advice will grow,” according to the report.
That’s important for firms that want to retain their client base. Cerulli found that consumer satisfaction among digital platform users increased at least 15 percentage points when a human was involved in delivering advice.
Additionally, over half of millennials say they are comfortable with an online advice relationship, according to research by Cerulli.
“As this cohort builds wealth and begins seeking advice, all financial services firms will find that they must deliver advice via the Internet, further increasing the convergence between the digital and the human element,” according to the report.
On the spectrum of robo-human convergence, Wealthfront, AssetBuilder and WiseBanyan provide the least human interaction for investors. Investors who use services like Betterment, SigFig, FutureAdvisor, Rebalance IRA and Hedgeable can access a representative when they need help, while direct providers like Vanguard and Schwab, and digital platforms like Personal Capital and TradeKing, offer more integrated robo-human services.