Investments
Robo-Advice and Its Impact on Wealth Management

Given the rapid growth of robo-advisory firms, some have questioned whether robo-advisors will replace human advisors. Because creating and/or purchasing a robo-advisor has become an attractive solution for the traditional firms that want to gather assets through digital advice platforms, we believe that human wealth advisors will not be replaced by technology; we feel that human interaction will always have a place in the wealth management business. Although computer models can provide the “right” answer based on a questionnaire, they are not developed enough to read body language, assist in the prioritization of goals or uncover potential considerations that may alter the optimal investment allocation. Particularly for more complex clients, there is typically a need for human response to dig deeper to truly understand an individual’s investment objectives and to address subtleties that typically arise in human conversation.

We believe firms should consider evaluating how and whether a robo-advisor fits within their business model, and we expect that most firms will adopt some level of robo-advice (or automated financial advice). By implementing a hybrid approach, robo-advice can potentially complement the traditional advisory model by offering advisors more time and resources to grow client books and increase their profitability. As firms reassess their business models, they may want to think about: 

  1. How important to their business plan is access to the mass market investor segment?
  2. Does the firm understand the growing importance of technology with its client base?
  3. Are the firm’s clients interested in the latest technology tools?
  4. Does the firm want to position itself as a low-touch, low-cost service provider or as a high-touch, customized investment solution provider? Or does the firm want to provide these two distinct service levels depending on client preferences/needs?
  5. Is a robo-advisor solution appropriate for the firm’s smaller-asset-size clients and/or future generations of current clients who have not yet accumulated significant wealth? 

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