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September 15, 2016 at 10:49 AM
Attempting to dispel the myths about robo-advice, Tom Kimberly, general manager of Betterment for Advisors, said the nascent robo-advice market is not “human vs. technology. One is not going to win and the other lose.”
Speaking at the Financial Planning Association’s national conference in Baltimore Wednesday, Kimberly noted the proliferation of “critiques of where we are” concerning robo-advice. “We have to remember change takes hold slowly in the industry we’re in.”
The relationship between advisors and those firms providing robo-type technologies is “developing,” Kimberly told attendees, and Betterment needs “to stay really engaged to make sure that our ambitions and goals are aligned with how you think about the market.”
Indeed, John Wotowicz, CEO of InStream Solutions, a financial planning software for advisors, noted in a separate panel discussion with Kimberly focusing on the new age of technology and advice, that it’s only been in the last five years that technologies have been developed for advisors and their clients. “We’re really at the beginning of the evolution of those advisor and client wealth management facing tools–not at the end.”
Both Wotowicz and Kimberly maintained the various tech developments will only free-up more time for advisors to help their clients.
Kimberly noted Betterment Institutional’s just-announced name change, to Betterment for Advisors, reflects the firm’s “mission” to partner with advisors. With the name change, he said that “we wanted to clarify to the marketplace who we’re serving—we’re not working with banks, insurance companies or large institutions.” Betterment now serves more than 350 advisors.
Both Wotowicz and Kimberly said enhancements to technology will also need to be made to adhere to the Department of Labor’s fiduciary rule.
The DOL’s rule calls for “increasing requirements to record the reasons for recommendations that we make,” Kimberly said in separate comments to ThinkAdvisor. At Betterment, “even when we are working with advisors we have a fiduciary role.”
For instance, Kimberly said, in the Betterment app, if “there’s a recommendation to roll over an old 401(k) into a Betterment IRA, we need to be doing the analysis to be sure that the recommendation is the in the best interest of the client and we’re recording that information. We do a lot of that already, but have to make sure all Is are dotted and Ts are crossed.”
He also said Betterment’s legal team is working on guidance for advisors to help them “think about the implications of the rule,” but he could not offer a timeline on its release.
As for myths versus realities about robo-advice, Kimberly offered the following examples:
Myth 1:
Robo-advice is a threat to traditional planners and our goal is to replace you.
Reality: Tech and humans will extend and amplify what we can do for advisors and their clients, and only create efficiencies for advisors and clients.
Myth 2:
Robo-advice platforms will dilute the human relationship I have with my clients, with technology now doing things I used to do.
