Rise of the Robots: How can advisors remain competitive?

We asked an industry insider about how advisors can best navigate the increasingly automated nature of financial services

The use of robo-advisors is on the rise and advisors who want to remain at the top of their game need to adapt. The introduction of automated investment services is creating a new level of complexity in what is already a fiercely competitive industry. But are robo-advisors a good thing and how will their increasing prevalence impact Canadian advisors?

“I think robo-advisors are an important innovation in the financial services business,” says Peter Kinkaide, Managing Director of Corporate Finance at Raintree Financial Solutions. “They allow for a reduction in the fee-load of putting together passive portfolios that gain market returns for clients. They cover off the investment management component of the overall investment advisory business.”

“There is still a place for the investment advisor, which is to help investors with their financial plans and to ensure they have the right balance in their portfolios.”

As a registered exempt market dealer, Kinkaide believes robo-advisors complement the alternative investments that Raintree provides to its clients. Although, he accepts automated advisors are not suitable in every situation. “A computer can’t sit down with a client and truly understand their circumstances and read their non-verbal or written communications,” he says. “That’s where advisors can shine by taking on that role and using robo-advice to complement to their overall financial service suite and offering to their client.”

The human element of investment advising is a strong pull for most investors and, even if the technology were available, it’s unlikely that advisors would be superseded by automated investment services. Although, with millennials accumulating more wealth and playing a more prominent role in the markets, the use of online platforms is going to increase, and it’s going to happen fast. For advisors reluctant to adapt and embrace robo-advisors, the future could be bleak.

“In order to remain competitive, advisors need to look at the areas in which they can provide the highest amount of value their clients,” Kinkaide says. “That should include investment strategy and identifying, and staying ahead of, where the industry is going.”

Kinkaide believes that advisors need to up their game and grow their knowledge in the robo-advisor space. “Computers will eventually displace a lot of the sales people inside the financial advisory business,” he says. “To stay ahead of the curve, investment advisors need to advise their clients on more than just what investments they should purchase. They need to help them understand how making those investments will tie into their overall strategy and help to set their financial future.”