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Are you competing with a computer?

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Computers are becoming more “human” every day. Ray Kurzweil, Google’s director of engineering and an artificial intelligence expert, says in an article in the Guardian that by 2029, computers will have the ability to outsmart humans. They’ll be able to understand what we say, learn from experience, make jokes and even flirt. What’s more, says Kurzweil, by 2045, computers will be a billion times more powerful than all of the human brains on Earth.

Today computers are ubiquitous, and robo-advisors are here to stay. But can computers replace human advisors? Can they provide suitable guidance and appropriate financial advice? Can they sell annuities? Not quite. At least, not quite yet.

Only about 5 percent of consumers currently use a robo-advisor for at least some of their investment decisions. For now, agents and brokers who sell annuities aren’t operating under any threat from computer-generated investment or retirement product advice, but it may be only a matter of time before machines evolve sufficiently to sell in this space.

According to a LIMRA brief, an alarming number of insurance professionals are unfamiliar with robo-advisors and don’t believe they will have a real impact on the industry. LIMRA defines a robo-advisor as “an online portfolio management service that provides automated advice based on algorithms. Many, if not all, robo-advisors base their algorithms on modern portfolio theory. There is minimal human interaction, and exchange-traded funds (ETFs) are used to allocate investments based on investor goals and risk tolerance. Robo-advisors currently do not offer solutions to more complex financial needs such as insurance or retirement and estate planning.”

Brokers and advisors would be well-advised to learn how to leverage evolving technologies. Robo-advisors — and technology in general — can actually benefit traditional, flesh-and-blood advisors. Technology does not undermine the traditional advisor-client relationship, it enables it.

Robo-advisors need human advisors to grow their business, and consumers aren’t using technology to replace professionals, but as a tool to help strengthen their relationship with their advisors, according to research from global analytics firm Cerulli Associates.

“Improved platforms will allow better communication between advisors and investors on an ongoing basis. Examples include replacing some office visits with other options or allowing for planning sessions with shared control of tools and calculators to explore various scenarios,” says the report.

Technology has emerged as one of the 10 key themes that planners are addressing more now with their clients, according to Financial Planning in 2015: Today’s Demands, Tomorrow’s Challenges, a report based on research from the Financial Planning Association’s Research and Practice Institute. Many research participants identified robo-advisors as one of the areas that they will address in their businesses or with clients going forward.

More than half of financial planners expect to use automated solutions to enhance their service offering, but 42 percent say they don’t feel that this technology will play any role in their business. Many participants — 60 percent of whom are licensed to sell annuities — are currently leveraging tools to manage investments while they focus on the value-add service and advice they provide.

Today’s robo-advisors can provide traditional advisors with some valuable opportunities to instill client trust while boosting sales. LIMRA suggests that advisors think long term and evolve the business model to include technology-driven alternatives that will improve the customer experience and attract younger clients.

LIMRA also suggests that advisors incorporate a robo-advisor platform to help fill the pipeline with new, emerging affluent clients — potentially the children of existing clients. “Forward-thinking sales professionals who can harness the power of ‘the machines’ also may enjoy a better tomorrow,” LIMRA says.


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