At this point in the evolution of the robo-advisor movement, I think it is safe to say that advisors and the industry have pretty much done a 180-degree turn from when robos first hit the scene about 10 years ago.
Robos started out as being considered by advisors as interesting, but insignificant toys that no serious investor would ever consider. But as the technology became more sophisticated and was enhanced with elegant interfaces and compelling wealth aggregation capabilities, advisors quickly went to a scary place, thinking they would suffer the same fate as taxi drivers and travel agents due to the disruption these evil online platforms portended.
However, once the marketing hype cleared and all of the big online brands like Schwab, Fidelity, BlackRock and Merrill rolled out the same, vanilla, do-it-yourself robo, advisors overcame their fears and were ready to move on to the next phase. The “ah ha” moment happened a couple of years ago when advisors began seeing the many benefits their businesses could gain from this new automation and technology versus feeling threatened by it.
Ultimately, the most valuable digital advice platforms now are the ones designed for professional advisors to up their game with productivity and client experience capabilities.
Very similar to the Kubler-Ross model that explains the stages of grief people go through in order to heal, advisors apparently needed to go through a similar process of denial, anger, bargaining, depression and finally acceptance to get here.
So now that we are here at acceptance, how can you improve your advice game with automated investing platforms? How do you get started?
Step one is to define your strategy and target market. What are you trying to accomplish by deploying an automated investing platform? Are you looking to streamline operations, create scale and become more efficient? Are you looking to profitably target new markets with an automated service offering such as “HENRYs” — High Earning, Not Rich Yet professionals — who don’t have assets today, but will be prime candidates in the future as they progress in their careers? For many firms it’s difficult to attract these investors due to their minimums and high costs of their service offering.
Children of current clients can also be a great target market as they are set to inherit the wealth of your aging clients. Research shows that 90% of people fire their parents’ advisor upon receiving the money, so this is a critical area to address.
Don’t Build a ‘Robo Sidecar’