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Technology > Marketing Technology

How Robo Technology Will Take Independent Advice to the Next Level

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Like many folks these days, I get a lot of alerts on my iPhone. Some are important—such as a check deposited in my bank account, a bill that needs to be paid, the monthly diagnostics on my truck or my accountant telling me to make my quarterly income tax deposit. Others, not so much: a new email from my sister, or Amazon telling me about a new book by Walter Mosley or that the Browns are going to start RG III at quarterback (Okay, that’s pretty important).

My point is that while I’m far from a fan of all things digital (I religiously avoid Facebook when possible), today’s technology provides us with an unprecedented flow of information, some of which actually does make our lives better. This is particularly true in the independent advisory world, which owes its existence to technology: forty years ago, virtually all retail “advisors” worked at large firms which had electronic access to the markets and hard-copy client accounts. 

Consequently, I was intrigued to read Jamie Green’s August 5 story “Another way to Look at Robo-Advisors: The Doctor Analogy,” in which Exceed Investments’ CEO Joe Halpern asks: “When you were ill, have you ever gone to a robo-doctor?” Having spent considerable time with our healthcare system during the past couple of years, I’d have to answer no—and yes—and suggest that the medical industry does indeed offer some insight into the future of financial advice.

Green captured Halpern’s thinking this way: “While acknowledging that advisors (and doctors) would do well to automate many rote procedures and lower-value processes in their practices, [Halpern] said that advisors have ‘expertise in investing, expertise in financial planning’ that justifies the fees they charge. Advisors should make use of institutional robo-advice platforms for clients with lower levels of assets, especially younger people whose income and assets are likely to grow in the coming years. Think of such a supportive robo-advisor as a ‘technology-enabled TAMP.’”

There’s no question in my mind that rather than posing a threat to independent advisors, the so called robo-advisors will become as ubiquitous in advisory firms as spreadsheets. They’ll provide solutions for common problems from what to do with smaller clients who can’t afford or justify traditional portfolio management, to reducing the time/cost of all portfolio management. Yet as I observed in the healthcare industry, information technology is transforming what doctors actually do, day-to-day, patient-to-patient. It will likely do the same for advisors.

People are often amazed/dismayed at how much of what we call “thinking” can be reduced to simple algorithms that can be performed at least as well by digital technology. In the old days, a doctor would examine a patient—take their temperature, blood pressure and pulse, listen to their lungs, observe them—and make a diagnosis. Today, all those things are done by someone else, usually an army of techs, who also preform myriad other tests: X-rays, blood analysis, EKGs, CAT scans, MRIs etc. etc.

What today’s doctors do is to analyze all the data these tests provide and come to a conclusion. But in my view, even this will soon change. There are very well defined “norms” for all this information: ranges that could be just as easily be scanned by a technology program providing doctors with a summary showing the areas of possible concern and even making suggestions for recommended follow-up actions.  Consequently, doctors will be able to “see” many more patients, by spending much less time with each, while providing a higher level of care. 

While financial advisors don’t run tests per se, they do collect a lot of information, much, if not all, of which, could be collected by someone else, or more likely by a computer. After all, financial planning and portfolio management information is collected through a relatively small number of specific questions to which there are a relatively small number of possible answers.

Which means the whole process could be easily digitized: by technology that recognizes typical ranges and “outlier” answers. (That is, if it hasn’t already been done.) 

Financial advisors, then, will become more like today’s doctors: analyzers of information that’s been collected by robo platforms, reviewers of recommendations provided by those platforms, and counselors helping clients to implement the appropriate recommendations. As Halpern suggested: “the most valuable benefit of working with an advisor is the advisor’s knowledge of human behavior.” 

Rather than a threat, “robo technology” will provide information that will enable independent advisors to do more of what technology can’t do.


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