The rise of online investment platforms, commonly referred to as robo-advisors, has many traditional financial advisors on high alert. If do-it-yourself firms like Wealthfront and Betterment stick around, will it truly create a sea change in our industry? I can’t answer that question. And while I am partial to the customized approach that human advisors can provide, I do believe that there are certain things that advisors can learn from robo-advisors.
Without further ado, here’s what robos do well—and what advisors can learn to help them better differentiate themselves from their lower-cost competitors.
1) Automate Your Processes
You don’t earn the robo moniker without effectively automating tedious tasks that have long been a pain point for advisors and clients. With robos, account opening, money movement to and from bank accounts, tax loss harvesting, and portfolio rebalancing are all reduced to a few clicks. This streamlining is their core competency and the foundation of all they do.
How can you automate your processes? Using model portfolios and developing rebalancing schedules can is a good start. Here at Commonwealth, we’ve tried to simplify these processes for our advisors. For example, our Practice 360°® Models application allows advisors to build their own model portfolios or to use ours, and rebalancing can be done with a simple click.
2) Stay in Regular Contact With Your Clients
Although robo platforms can’t offer a warm handshake and a cup of coffee while discussing the markets, they are still very effective communicators. They are able to deliver missives on a daily basis through multiple channels, including e-mail, blog posts, tweets, and client-messaging systems that allow them to “customize” messages to clients when clients log into their accounts. As an example of this, the figure below shows how Betterment and Wealthfront delivered messages to their clients during the market volatility of August 2015.
How can you communicate more effectively with clients? Although you may not be able to keep up with robos in terms of how often you send messages to clients, the lesson here is that you can and should be active on social media. This includes sharing quality content that speaks to your target audience, figuring out which platforms that audience is using, and taking the time to build social media into your overall marketing plan.
3) Share Content That’s Relevant
The robos just mentioned—Betterment and Wealthfront—have another valuable tool at their disposal: an impressive array of academics. Betterment boasts an Investment Committee with the requisite CFA® and CFP® certifications but also leverages multiple PhDs from the faculty of Columbia University. Wealthfront counters with economist Burton Malkiel and Meir Statman, widely recognized as one of the foremost experts on behavioral finance. Further, the content available from both firms is not only voluminous—covering topics across the personal finance spectrum—but also very high quality and likely on par with the content libraries of many established distribution giants.
How can you find relevant content? Of course, you may not have access to faculty from an Ivy League institution. But you should still provide your clients with relevant content. Your broker/dealer likely has such content that you can customize for your clients. At Commonwealth, advisors have a wealth of resources available via our Four-Corner Marketing engine, including brochures, market commentary, and social media updates. You might also search the websites of well-known outlets to stay abreast of what’s happening in the industry and share relevant content with your clients and other followers. (For example, have you checked out The Independent Market Observer?)