Battling the "Robo-Advisor" — Human Connection and Client Engagement

For some time now technology has been reshaping and changing the role of the financial advisor, but could technology actually replace the financial advisor entirely? That's what some observers would have you think.

Today's advisor has a vast array of technology enabled tools and resources to help them provide planning solutions. These tools crunch numbers and illustrate various scenarios. They can match plans with the appropriate financially engineered products, and even provide up to the minute online goal tracking.

Could these tools actually threaten the viability of the financial advisor? It is true that technology can cheaply replace once highly valued quantitative analytic skills. "Robo-advisers" incorporate sophisticated planning software that can equip the novice user with the the ability to generate a plan that is comparable to a custom plan developed by a CFP or a CPA.

I have heard one observer predict that these "robo-advisors" will be the doom of the financial advisor and that advisors are destined to go the way of the travel agent. You remember travel agents? They were the people who used to sell airline tickets for a living.

I, on the other hand, do not agree with this assessment of the future. I happen to believe that there is one thing that advisors can do better than any technology. It is ability to put things in the right context so that people can make the right decisions. It is about creating a personal human connection with the client. Helping the client develop a vivid and achievable vision for their goals, their hopes, and their aspirations. This is something that no machine can do.

Being a financial advisor is really about being an "enabler". The "value add" is not that you have the right answers, it is that you have the right questions.

The fact of the matter is that people don't act on what they know, they act on how they "feel" about what they know. To be effective at enabling people to act, advisors should use these five steps to engage clients.

  • Emotionally Connect
  • Inform Key Principles
  • Involve Exploration of Outcomes
  • Enable Decision Making and Implementation
  • Track and Monitor Progress
  • The first step is to Emotionally Connect. Advisors must draw out the client's visions for the future, the emotional picture of the goals. What will it actually look like? What will it help your achieve or realize? Why does that matter? Advisors must seek to understand the clients feelings about this future vision, both positive and negative. Most importantly, advisor must listen for the underlying values that give this picture meaning.

    The second step is to Inform Key Principles. This is very much a teaching part of the process. In contrast to being the expert with the answer, i.e. "here is what you should do", this is being the expert with a framework for the decision process and providing guidance along the way. The skills here have to do with how you package and share the needed information, such as being prepared with "knowledge objects", prepackaged "bite size" chunks of information. Framing the content appropriately and posing questions along the way to help facilitate engagement and test for understanding. The objective is to equip the client with the information needed to make the right decision.

    The third step is to Involve Exploration of Outcomes. The questioning process continues with the goal being to help the client explore how to best realize their vision. Using questions that help clients explore various outcomes and determine what is most desirable. It is through this step that the client begins to arrive at their decision.

    The fourth step is to Enable Decision Making and Implementation. Summarize the points covered in exploration. Demonstrate how positive outcomes are achieved and negative outcomes are managed. Connect the solution to the emotional context established for the goal. Enable the decision and implement the plan.

    The fifth step is to Track and Monitor Progress. This is critical to the entire value proposition of the financial advisor, particularly if your business model involves an ongoing fee arrangement. After all, what is the "value add" of the advisor if there is no ongoing effort to ensure the desired outcome will be achieved?

    At first blush, these steps would appear to resemble most common planning processes. These are the same steps you would likely see on a "robo-advisor" platform, but here is where an advisor makes the difference. It is the emotional intelligence, aptitude, skill and underlying intent of the advisor that technology cannot replicate. The human connection is not programmable. These are the things that are certain to retain their value even in a constantly evolving environment like financial services.