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Portfolio > Mutual Funds

Mutual Funds, RIAs & Brokers: Act Now, or You’ll Lose the Robo Race

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“Are robos a threat to you?” asked Joel Bruckenstein, an advisor technology expert, during a pre-conference discussion on Monday at the Morningstar Investment Conference in Chicago.

While he said it depends on advisors’ business model and what their future plans are, he also addressed three specific areas in the industry that could be threatened by robo-advisors if they don’t act.

Mutual Funds

According to Bruckenstein, “a lot of mutual funds” are at-risk.

“If you think about balanced funds and target date funds, do they really give an individualized experience?” he said. “Or for the same money or less money, could an individual today go to a robo and get a more individualized portfolio and maybe a better user experience?”

Independent Advisors

Bruckenstein thinks there is both a threat and opportunity among indie advisors.

“To my mind, if you do nothing it is a threat to your business,” he said. “It may not be today but by the time you realize the threat and are able to act on it, it will probably be too late.”

While there is a threat, he also says there’s an opportunity for these advisors.

“Because you can have a better client experience, lower costs and you can reach out to new markets,” he said.


According to Bruckenstein, brokers have a lot of the same opportunities as the independent registered investment advisors.

“But, the early indications I’m seeing are that brokerage firms are not taking full advantage of the technology or they’re not applying an appropriate business model to the technology,” he said. “If they have the same cost structure, for example, that they historically have, it kind of defeats a lot the purpose of a robo. And depending on who gets it right and who gets its wrong, there may be as many losers as winners – maybe more losers. We’ll have to wait and see.”

By almost every metric, those advisory firms that are adopting newer technologies into their practices are more successful and more profitable, according to Bruckenstein.

“I think it’s obvious to me, and I hope it is to you, that the financial service model is evolving,” he said. “There is a tremendous opportunity here for you to lower your cost and enter new markets and differentiate and, I would add, to provide a far superior client experience.”

The problem is financial services, historically, has never been very quick to adapt to new technologies.

“A lot of you were very late to adopting email to your practice, to adopting the web to your practices,” Bruckenstein said. “And you really didn’t pay a penalty for that. Why? Because all your peers were doing the exact same thing you were. And there was really no outside catalyst that put you at risk.”

Today, Bruckenstein noted that there are several outside catalysts – such as Betterment and Wealthfront – that are putting advisors at risk.

“If you hesitate and you follow the same pattern you always have, you will pay a price in my opinion for that,” he said. “The way you need to think about these platforms is not as something new and different – but the next generation of advisor technology. If you think about it that way, it’s a lot easier for you to wrap your head around and embrace.”

– Check out ThinkAdvisor’s Morningstar Investment Conference special coverage.


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