Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Technology > Marketing Technology

How to Win the Man vs. Machine Advice Game

Your article was successfully shared with the contacts you provided.

The competitive pressures and opportunities tied to robo-advisors and other technology are dominating industry conferences. They were left, right and center at TD Ameritrade Institutional’s recent National LINC 2018 RIA conference, for instance. At this event, industry leaders highlighted both the power and threat of technology and how advisors can best address these trends.

“Our value-add [for clients] is undergoing a major shift,” said Ric Edelman, founder and executive chairman of Edelman Financial Services, before some 3,500 RIAs and other guests at LINC on Feb. 1 in Orlando. “That means adopting artificial intelligence … and showing clients how we will be their personal finance quarterback. If we do that, then clients will let us manage their assets.”

It’s sink or swim, says the advisor and author. “We need to become experts on this [data] analytics and stay ahead of the machines. Being able to say, ‘Hey Siri, what’s the value of my portfolio?’ is only about a year away,” he explained, referring to Apple’s voice-activated virtual assistant.

TD Ameritrade “is one of the original fintech disruptors,” said President & CEO Tim Hockey during a panel discussion. “Now we are an incumbent. How can we innovate faster than the new firms?” The answer, he explained, is to “not be afraid or rest on our laurels. We must do more partnerships. One, two or three years from now, we should see blockchain vendors in the Veo Village [conference tech center].”

According to TD Ameritrade Institutional President Tom Nally, the firm aims to “fuel more innovation” by staging a fintech contest at its ninth annual technology summit for the RIA channel, which takes place this summer near Dallas. (The firm’s RIA platform Veo One includes 22 applications from 20 tech firms, with the latest additions being AdvisorEngine, Advyzon, Blueleaf, Envestnet | Tamarac, RightCapital and Wealthbox.)

Keeping up with the pace of technology and innovation is no easy task, according to futurist and entrepreneur Lex Sokolin. “It’s a crushing problem to apply human knowledge to data. Every second, there is so much data about clients — what they bought on Amazon and their credit card purchases,” he explained.

“The challenge is building human judgement into machine learning and algorithms and to plug that it into some technology in the future,” said Sokolin, who now leads fintech strategy at the research firm Autonomous and is on the board of AdvisorEngine.

Duran’s Take

United Capital CEO Joe Duran told several hundred advisors and other guests how they can best compete in the age of digital disruption during a pre-conference event at LINC 2018. “It’s either the most exciting or the most awful time to be in the industry,” Duran said. “But the reality is, it’s completely in your hands. I hope you can make it an amazing time.”

In remarks that resembled those shared by broker-dealer executives at the Financial Services Institute’s OneVoice 2018 conference, which took place in late January near Dallas (See “IBD Execs Get Real on Industry Shifts,” page 43), the United Capital chief says advisors need to help move the financial-advice business out of its “boring, meaningless” ways.

The speaker reminded RIAs and other audience members that Vanguard CEO Tim Buckley and the firm he leads are “the Amazon of our industry.” As Buckley explained at Inside ETF’s January event, according to Duran: “Fifty-eight percent of your job is susceptible to automation, and your fees are likely to continue to decline.”

The United Capital chief added, “You cannot beat [Vanguard] if you do not adopt.” This means finding “a winning combination that is mostly human and letting technology do what [it can] do,” he explained.

Since advisors generally shouldn’t spend their time trying to beat index funds, how can they earn their 1% fees? Why not show investors how they can live better lives? “That’s the opportunity for advisors,” Duran said, rather than asset allocation.

On a daily basis, this means advisors need to show clients how they devote their time, financial and other resources to what they most care about. “Everyone is not [just] average. They each will have once-in-a-lifetime experiences,” he explained.

Win clients by understanding them better than anyone else in the industry — including their financial biases, intentions and preferences; work with them collaboratively, so they don’t feel they’re “only a number” and have honest conversations with them about their concerns.

“Use technology to enhance the relationship” by sharing video messages with them and working with them regularly by phone or via interactive apps, for example. “Those who do this in the most relevant and exciting ways using data and digital [tools] win,” said Duran. “And … give clients permission to live the lives they want.”

The executive also reminded the audience that they should not act like “the walking dead” and limit discussions to investments and planning. “The reality is that it’s behavioral [advice] — that’s the [real] value we offer,” he explained.

Sankaran’s Views

TD Ameritrade Chief Information Officer Vijay Sankaran knows how to translate his experience — and global trends — into both daunting and doable tasks. “For all of us, the world is an exciting place. We live on the cusp of disruption right now that none of us has seen before,” he said at LINC.

With the rapid pace of change, everyone must think long and hard about how to move their businesses forward. “But it’s not about being the strongest or the biggest, it’s about how you adapt to change,” said Sankaran, a former Ford Motor executive.

Disruption is everywhere, he says, pointing to this week’s news that Amazon, Berkshire-Hathaway and JPMorgan have teamed up to start a new health-care venture. “Linear thinking at large corporations” has proven to be their demise, the CIO said.

The cost of innovation is coming down as the speed of technical development accelerates. “By 2030, it is estimated that machines will become as smart as humans … and we underestimate the pace of technology’s evolution,” he explained.

Instead of thinking linearly or trying to fight cannibalization of a business, why not embrace it? That’s what one Chinese firm with multiple chat services has done, Sankaran says. “That is what we are thinking about at TD, too—when it comes to megatrends, no one can know” exactly where things are coming from or going, he explained.

It’s also important to stay away from outdated ways of thinking, such as about traditional market segmentation. “I did tech support and now [Amazon Echo] is my parents’ ‘go to’ device,” the technology leader said.

Rather than fear technology and innovation, “seize it” and ask “how can you get data to help you and your clients going forward?” Sankaran said. “It’s software, not hardware, that is the key to all of this. This means having artificial intelligence, a machine, to be your personal assistant.”

Focus on how and where you can end manual tasks and use technology to drive efficiency, he explains. “How are you reaching clients? Are you using emerging and smart interfaces?”

The CIO said that advisors need to accept that “everything is moving to mobile first and to self-service platforms.” He summed up his main conclusions as follows: automate, use data analytics, work with technology partners to integrate tools and interfaces and take cybersecurity seriously.

“It is my top priority, and we are working on malware detection, for instance, and you need to, too,” Sankaran said. “Also, educate your clients around [the importance of] security and protecting their information.”

Got Siri?

In terms of the use — and threat — of voice-activated technology, Sankaran says the industry is moving to incorporate more of it.

On the retail side of the business, the firm introduced a “chatbot” about five months ago so do-it-yourself investors can ask the firm about their accounts and the markets via Facebook’s messaging application. In late 2016, TD Ameritrade added voice-enabled search for stock quotes through Alexa, Amazon’s virtual aid.

In terms of client-specific information available on Alexa, the firm is planning to share data on balances and positions over the next year or so — and to do the same via Google Home for its retail clients.

As for the RIA or institutional side, the CIO said, “It’s coming, and we have to look at what advisors want to ask [virtual assistants] — what type of questions do they have.”

Over the next few months, “the convergence of advisor and client information” should be added to the Advisor Client portal, he adds. “But voice recognition is not part of this [rollout].”

TD Ameritrade is working, though, to make information that the advisor wants the client to have access to via voice. Such client-facing voice-recognition features for Advisor Client are likely to be introduced in late 2018 or early 2019, according to Sankaran.

“We do not see as a huge threat from Alexa-type technology on its own,” he said. “We think people want to know their total net worth, across accounts and such. Even knowing that [via Alexa] will not replace the advisor.”

Still, he admits, advisors see robos getting more powerful “and then they need to be able to answer the question asked by tech-savvy clients: What is my advisor giving me that the robo is not?”

The answer should inform advisors’ incorporation of technology, the CEO explained. “We say embrace the robo, see what it does and how it can add value.”


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.