In October of 2014, I wrote a piece titled The Next Market Downturn Could Save Your RIA Firm, which addressed how a market correction like the one we are currently witnessing could be used as an advantage for the traditional “human” advisory firm. I wasn’t the first observer, and I assuredly won’t be the last, who suggested that a market downturn could expose the average robo-adviser as limited in its ability to coach clients through the tougher parts of their financial lives.
Mason Braswell of InvestmentNews recently published a story – Robo-Advisers Face First Reckoning in Downturn – which touches on some of the same themes I had mentioned last fall.
“The market correction on Friday and volatility that continued into this week may be the first test of automated investment platforms that critics of robo-advisers have been waiting for.”
The assertion goes something like this: when there is the inevitable market correction or just a bad day with stocks, how will the robo-adviser keep up with the flow of calls and inbound requests for hand-holding? Well, today is that day and the days and weeks ahead will reveal how their clients felt about their performance – both in terms of client service as well as in terms of investment portfolio performance.
There is one place that the robo-adviser crowd is assuredly ahead of the traditional RIA pack that few people are willing to give them credit for during times of crisis: client communication.
Built to engage with clients via mobile and the web, robo-advisers as a group were collectively more proactive in providing guidance and assurance to their clients via blog posts, social media interactions and emai
l and text messages to phones. While many financial advisers are likely to be on vacation or taking long weekends this time of the late summer, their ability to communicate to a wide range of clients is just the same as a robo: the best bet still is a robust, proactive digital communications strategy.
So, as InvestmentNews calls it the “first reckoning” for robo-advisers, it is also a status check for the traditional advice-givers.
- Does your firm have an established, consistent online presence that your clients are used to resourcing?
- Are you present where your clients are getting their news (and finding out about the happenings of the stock and bond markets)?
- As they check their smartphones for headlines, can they easily log-in from the same device to check their accounts or request a phone call or appointment?
- As they scroll through social media reading what the pundits are saying, do they know where to find your take on the markets?
Make no mistake, these kinds of market environments can do a lot to help separate quality RIA firms from the pack.
Proactive financial coaching, responsive counsel to emotionally charged money questions and the ability to tactically adjust portfolios are areas where humans have the edge. But, if your firm fails to meet or exceed the communications standards set by the robo-adviser, the market decline may not separate you at all… it just may prove to your clients that there is little difference between your firm and your less expensive robo-adviser cousin.
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