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To Robo or Not to Robo Is NOT the Question in 2018


To Robo or Not to Robo Is NOT the Question in 2018

Choosing to incorporate digital (“robo”) technology into your financial or wealth management practice is not an all-or-nothing decision. Even when your sole goal is to attract millennials, you can’t view adding robo-technology as a stand-alone solution.

Why Think About Robo-Technology?

A study published by Pershing Advisor Solutions (in conjunction with Aite Group)1 in May 2016 showed that Tech Enabled firms grew their Assets and Revenues at a higher rate than other firms in their survey (for the 12 month period ending October 2015). More specifically, 38% of Tech Enabled firms grew their Assets more than 10% during that 12-month period, double the percentage of other firms. In this highly competitive industry environment where growth is at a premium, engaging solutions that will provide a greater probability of generating higher growth should not be ignored. The biggest reasons for firms not adopting technology include budget constraints and implementation challenges that could disrupt client services and impact advisor productivity. The implementation challenges can be overcome fairly easily with a well-structured plan. Even budget constraints do not have to completely derail the adoption of technology.

Isn’t Robo-Technology Only Useful for Younger People with Less Money?

While it is widely known that millenials show a strong preference for using technology in nearly all aspects of their lives, Baby Boomers – the generation with the bulk of today’s wealth – are incorporating technology into their daily lives. A recent Pew Research report2 on internet usage shows that 62% of Americans age 65+ use Facebook regularly, and a separate study conducted by Penn State University2 in early 2016 showed that baby boomers were the fastest growing age demographic on Facebook. Don’t fool yourself, your baby boomer clients are rapidly engaging with technology. They may not be as proficient with technology as millenials, but baby boomers are definitely using technology more and more each day. If you are not finding ways to incorporate digital technology in your service model, you may want to do a quick Google search on the demise of the dinosaurs to see what your future may hold.

Won’t Robo-Technology Replace My Role with Clients?

If done well, incorporating digital technology into your practice will NOT make you obsolete (not including it certainly can, though). Banks offer evidence to how people choose to engage technology in handling their money. According to a Bank Innovation survey3 conducted early in 2016, over a 12-month period 83% of respondents owning smart phones and having bank accounts visited a branch or spoke with a teller (82% used an ATM, 53% used mobile banking, and 29% used telephone banking). While a definitive conclusion of the value of in-person banking cannot be drawn from these results, they do show that there are clearly reasons why people with the access to digital and mobile technology capabilities still choose to utilize human service capabilities.

The same scenario will play out with financial advisory and wealth management businesses. We have already seen some evidence with early direct-to-consumer robo-advisors having to add advisor-driven offerings or adding human advisor service capabilities to their digital-first business models. Robo or digital offerings will not replace the need for advisors. There will always be a need for individual advisors to help guide clients through major financial life decisions. Technology, though, cannot be ignored. You cannot rest on the notion that older, high net worth clients – or clients who need help with their life savings – have always engaged with a high touch/low tech offering, so they always will. The evidence is pointing toward the need for technology.

Related: How to Identify Someone’s Buying Language

To Robo or Not to Robo?

Again, this decision is not all-or-nothing. So whether you do or don’t incorporate technology into your practice is NOT the question. The question is, “How do you incorporate technology into your practice?” As much as many of the custodians within the RIA space would have you believe, there is not a cookie-cutter approach that fits every firm’s needs. For each advisor the approach should be different and appropriate for what is unique about you. That said, regardless of how much or how little you incorporate technology into your practice, the two most critical areas of focusing in identifying if a specific technology makes sense are: 1) does it make doing business with me easier (e.g., online account opening, DocuSign for ongoing forms, client portal, etc.), and 2) does it eliminate inefficient processes in my practice (e.g., automated portfolio allocation and trading, electronic proposal generation and delivery, online portfolio reporting, etc.)

Be thoughtful about what technology you incorporate into your practice and how you incorporate it. Assess your practice and service offering, put a plan together to begin incorporating technology where it makes sense, and stay focused on what will make your clients’ lives easier and better in their working with you. Your clients are engaging with technology in their lives. Make sure they are engaging with you through technology, not your competitors.

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