Zonder aanpassing straks alleen nog maar ROBO-advies?

The rise of automated investment services—“robo-advice” firms such as Betterment, FutureAdvisor and Wealthfront—has many advisors wondering if they will still have a client base in a decade. In the last two years alone, these firms have collectively raised over $82 million in venture capital and now reportedly have over $2 billion under management, primarily from millennial clients.

Although their recent exponential growth is impressive, and the threat they pose is real, they still represent a very small percentage of the overall wealth managed by traditional firms. That said, there has been long-standing fear and uncertainty in the financial industry about direct channels wiping out advisors. These fears are not limited to financial advice. The Second Machine Age, a powerful new book from MIT professors Erik Brynjolfsson and Andrew McAfee, suggests that big data and automation are threatening jobs, not only in manufacturing, clerical and retail but also in professions such as law, education, medicine and, yes, financial services.

Tipping Point
It’s not unlike what Travelocity and Expedia did to travel agents in the ’90s. Over the course of two decades in the U.S., we saw the number of travel retail locations drop from 34,000 at its peak to approximately 13,000 today, mostly a direct result of proliferating automated travel booking sites.

There are two major differences between travel and a financial plan, of course. First, most people know roughly what they are looking for when it comes to travel. Seat 10B on United Airlines Flight 330 is the same whether you purchase it online or pay a premium to have a travel agent book it for you. Second, unlike death, retirement or divorce, travel is generally fun and/or relatively straightforward to plan. Sites like Travelocity have made it very simple to book, so most people are choosing self-service, optimizing for both cost and convenience.

The question is what it would take for similar displacement to happen with financial advice. There are four trends that make this more likely than ever:

1. Online access to trading and transactions. Online trading has been around the longest. In the ’90s, then-upstarts E*Trade, Ameritrade and Schwab emerged, democratizing access to trades and transactions. These Web-first players challenged traditional firms on fees and forced the old guard to get online.

2. Online access to product information described in simple language. Given the regulatory push away from complex products and language by the Consumer Financial Protection Bureau, firms need to simplify how they present investment products. Investors need to understand in simple terms the opportunity, structure and risk associated with the investments being considered.

3. Online access to unique products. Until recently, only the very affluent could access certain lower-fee products when they went through an elite private banking group. This has changed, and today’s offerings like the Wealthfront 500 allow individuals access to investment strategies that normally would only have been available to high-net-worth investors with more than $5 million to invest.

4. Online access to advanced investment algorithms. Advancements in computational power are giving rise to powerful automated investment algorithms that outperform human investment managers in some asset classes. According to CNBC.com, last year only 42% of large-cap core fund managers outperformed the S&P 500 net of fees. When you factor in the average 1% fee advisors charge for advice, some clients last year were worse off than they would have been had they invested in an index fund. In fact, this is a major reason behind the decision by a growing number of advisors to outsource investment management and investing strategies to lower-cost automated funds.

A 2012 study by Northern Trust, for example, found that 50% of advisors outsource investment management activities and that six out of 10 advisors outsource more that half of their clients’ assets. This number is expected to increase because advisors want to spend more time focusing on the unique needs of their clients and adding value by providing a custom level of service as opposed to investment management and time-consuming back-office operations.

What, then, is the fate of the financial advisor?

Possible Scenarios
“All in.” In this case, Wealthfront replaces advisors.  Investors choose an online provider over the personal service of an advisor and manage their entire portfolio online.

A hybrid model. In this situation, a Wealthfront would complement investors’ existing investment portfolios, providing them with the best of both worlds—the personal service of an advisor and access to an online platform. This is consistent with the fact that, according to Spectrem Group, 55% of mass affluent clients, with a net worth between $100,000 and $1 million, are neither do-it-yourselfers only nor only advisor clients, but both, meaning they have both an advisor and a portion of their assets in an account at Schwab, E*Trade, Wealthfront, etc.

A feeder. In this scenario, Wealthfront serves as the lead generation for advisors. The site’s low-cost structure and $5,000 minimum (compared with average advisor minimums that can range from $100,000 to $1 million) capture the long tail of clients, and when clients reach a certain level of affluence or complexity, they will “upgrade” to an advisor.

Clients’ needs are based on the complexities of their financial positions and stations in life. A college graduate has little need for estate planning as opposed to a more seasoned investor who may own a home, have a family and have serious concerns about college education expenses, retirement and aging parents. As the complexity increases, so does the need for greater financial advice and direction.

Avoiding The Fate Of Travel Agents
What got us here won’t get us there. There is no question that today’s average advisor is at risk of becoming obsolete within 10 years. But advisors as a whole do not have to become obsolete if they are willing to adapt. A Formula One-winning race car in the ’80s would be outdated and inadequate to compete on today’s race circuit. Financial advisors want to avoid the same fate. They must “disrupt themselves” and learn to provide value in the new ways expected by clients.

This list is by no means complete, but here are four strategies I would recommend advisors consider to survive and thrive in the coming decade:

Provide Unique Value That Can’t Be Automated. Advisors can continue to add value by providing comprehensive, holistic advice based on the individual goals, time horizons and risk tolerance of their clients. By delivering advice that is not easily commoditized by an automated algorithm or online program, advisors will continue to survive even as the world automates.

Find Your Tribe. Advisors can leverage technology to develop a scalable practice focused on the target markets they’d like to serve. This then allows them to become a big fish in a small pond and focus their practice around clients who share common interests and values. For example, one successful advisor we know focuses solely on recent medical school graduates. Another focuses on high-tech employees.

Be High-Touch. The New York Times editor Quentin Hardy recently wrote, “Increasingly, the most valuable things in our world involve people looking at you, touching you and understanding you.” Today, the most valuable businesses and individuals are those who can connect and customize to serve their clients.

The U.S. Bureau of Labor Statistics forecasts a jump in the number of jobs (as well as pay) in home health, personal care, psychology, personal training and life coaching, at the same time the costs of goods and transactions continue to decline. Will the successful financial advisor of tomorrow be more therapist than investment advisor?

Be High-Tech. Clients are social, mobile and digital. Therefore, it’s not acceptable for the financial advisor of tomorrow to not be social, mobile and digital if the advisor wants to stay relevant in his or her clients’ lives.

Firms need to leverage technology to enhance an advisor’s practice and provide training as well as integrated tools—giving clients the ability to go online to trade, view transactions, learn and talk to someone when and how they want. In other words, if firms and advisors don’t race with the machine, they will quickly find themselves racing against the machine, and that is not likely a race they can win when it comes to cost or convenience.

The financial services industry is not immune to change, and those who adapt improve their chances for relevance and survival against a growing threat of new technologies. Playing it safe is risky, and the opportunity for advisors today lies in leveraging technology to improve the service they provide clients and to differentiate the uniqueness of their practice.

In the future, there will be a premium on businesses that provide uniquely human experiences coupled with the convenience of technology. In a world of big data and automation, the human touch and personal relationships will become scarce—and therefore more valuable than ever.

Clara Shih is CEO and founder of Hearsay Social, provider of the leading social business platform for the financial services industry. She is also a New York Times-featured best-selling author and has been named one of Fortune’sMost Powerful Women Entrepreneurs.
Bron: http://www.fa-mag.com/news/will-financial-advisors-become-obsolete-...

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