Advisors, particularly those that serve the wealthy, may fear that automating certain tasks — and removing some personal contact — may alienate clients. Recent research shows that those fears may be unfounded.
More than 70% of investors in the U.S. and U.K. with at least $100,000 in investable assets said automated tools can have a positive impact on their wealth manager’s advice and decision making process. Respondents said automation provides a way to speed up onboarding processes, making them more convenient.
Carmela Melone, analyst at MyPrivateBanking Research, said in a report that wealthy investors, as well as younger investors, “show a great openness, awareness and knowledge about robo advice.”
“Interestingly, the adoption of automated wealth advice is happening faster in the high-net-worth segment than mass affluent with current usage of online wealth management tools at 43% and 17%, respectively,” she said. “The results provide clear, empirical evidence on why automated advice and robo services are a significant part of every wealth manager’s future.”
However, over half of respondents said their biggest worry regarding robo-advisors and automated processes was that their advisor could go too far in that direction – that managers might rely too much on the online tools and fail to do their own research.
The firm surveyed 600 affluent investors in the U.S. and U.K. for the report and found that stateside, most investors associate robo-advice with Charles Schwab. The survey was conducted in March 2016, prior to Schwab’s announcement that Intelligent Portfolios, its digital advice platforms for retail investors and advisors, reached $6.6 billion in assets since launching early last year.
The survey found U.K. investors tend to be more receptive to robo-advice. Investors there reported being willing to pay an average 10 basis points more than U.S. investors would pay for robo-advice; however, the report also found that U.K. investors would also be willing to pay more for human-only advice.
Furthermore, just 12% of U.K. investors said they were unlikely to use a robo-advisor in the future, compared with 28% of U.S. investors.
The report found financial planning and tax optimization tools were the most important value-added services to respondents. Although it may be tempting to write off robo-services as attractive to younger investors only, the report found busy self-directed middle-age investors are also ideal targets.
MyPrivateBanking encouraged advisors to examine their own firms to identify areas where they can implement automated processes, from onboarding to delivering advice. Even as they implement automated tools to scale their practices, they should make sure they’re still available to clients. Telephone and email are the dominant methods of preferred communication among wealthy investors, but the report found demand for “more innovative channels, including social media, is increasing.”
Capgemini’s annual World Wealth Report, released in December, found that among millionaires, digital service models are very appealing – again, particularly among younger respondents.
That survey found 87% of investors under age 40 with at least $1 million in investable assets believe “all or most of their wealth management relationship” will be conducted digitally over the next five years, Jamie Green of ThinkAdvisor reported. Almost half of investors over 40 agreed.
Meanwhile, only 18% of wealth managers surveyed by RBC Wealth Management for the same report said their clients were likely to use robo-services, while 34% of investors said they would.
— Read Robo Takeover of Advice Industry Is a Myth, Morgan Stanley Tech Exec Says on ThinkAdvisor.