In my last blog (How Robo Technology Will Take Independent Advice to the Next Level), I concluded with the following: “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 [Exceed Investments’ CEO Joe] Halpern suggested: ‘the most valuable benefit of working with an advisor is the advisor’s knowledge of human behavior.’”
In a thoughtful comment to that blog, financial advisor coach and founder and CEO of Belay Advisor, Steve Sanduski, called me out a bit on that conclusion, and rightly so.
“I’ve never been a fan of the doctor analogy for advisors. Think about it. You go to a doctor, get 10 minutes of face time with the doctor, then you get a bill for hundreds of dollars,” he wrote. “There’s really no relationship established with the doctor and I’m not inclined to give them referrals. If advisors use technology so they can see many more clients (like the doctor having a room full of patients waiting to see them) and only spend 10 minutes of face time with each of them, I think we’ll lose much of what makes the advisor/client relationship special.
“Yes, as you write, this might work for investors with $20,000 to invest, but for people with $500k or more who are paying $5,000 per year or more for ‘advice,’ I don’t see how it makes sense for the advisor to have 4 appointments per hour, hop from office to office, and have an army of assistants checking the client’s financial vitals.
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“I hope our industry does not move toward a doctor model for high-net-worth clients. I’m all for using technology to automate the routine of data gathering, investing, rebalancing, etc., and for pulling out big data insights to help the advisor give better advice.
“Where I think the advisor adds great value is in the conversation about all the non-investment related advice (traditional financial planning, career planning, longevity planning, retirement coaching, health planning, life planning). I tell my coaching clients, ‘You’re definitely worth 1% per year of AUM, but it’s 30 bps for investing and 70 bps for everything else.
“The really hard part for advisors is how to articulate that 70 bps and make it tangible for the client to feel comfortable paying for it.”