As investment and wealth-management firms face increasing regulation and fee pressure, the need to consider options for hybrid advice ever more evident. That includes incorporating robo-like solutions into their practices — though some are embracing the possibility more readily than others.
Aside from allowing automatic and potentially less biased investment decisions, using a robo-advisor may allow financial advisors to grow their digitally inclined millennial base. But that argument doesn’t fly for Patricia Baum, a Maryland adviser with RBC Wealth Management.
“We have other ways to attract millennials,” Baum told the Financial Times. “The relationship is the biggest part of the business and with a robo-adviser you lose that.”
That might not be as much a consideration for several big broker-dealers like Bank of America Merrill Lynch, Morgan Stanley Wealth Management, and Wells Fargo Advisors, which have all invested in technology that could be the foundation for automated advice services.
Another firm dipping its toes in is Raymond James Financial, which has crafted a technology platform that incorporates rebalancing tools, automated updates, and other robo elements into its advisors’ systems. According to Florida-based Raymond James advisor Mark Thompson, the changes are being rolled out as “robo-advisory options” that advisors can pick and choose from to make the technology easier to integrate into their practices.
Thompson acknowledged that “productivity needs to go up exponentially” given investors’ heightened attention on fees. “[But] there’s nothing like that human voice and human touch in a [volatile] month like February,” he added.
Some advisors see a place for robos, particularly for those who are just starting to save and invest right as they start working. But for other advisors, whose practices already have a set minimum account level for high-net-worth clients, setting up a robo-program and waiting for those accounts to get large enough to be moved up seems impractical.
Another possible hurdle to robo acceptance is the fact that many advisors have older clients, and are themselves already at the cusp of retirement. In such cases, it may be too late to start instituting disruptive changes.
But for practices that aren’t ready to shutter their doors just yet, having a robo element may be perfect to capture clients who are ready to shift away from self-directed investing and robo-advisors.
“We’ve seen people hit their mid-40s, and say: ‘Gosh, this is great, but I really need a cohesive financial plan,” said Tristan Caudron of Washington DC who works at Wells Fargo. “It’s generally a nice transition, so I can see how a firm like Wells or another broker-dealer can look at it and believe they can offer the same service and keep people in-house for the entirety of their financial lifespan.”
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