Robo-Advice and Its Impact on Financial Advisors

In the Robo-Advisors segment, the number of users is expected to amount to 543.167m users by 2027. (Statistica)

But what impact is this having on wealth management?

Years ago, there was talks of robo-investing taking over the human advisor role, but that never happened.

That’s because wealth managers are working in a relationship driven industry.

In fact, clients don’t only pay for advice, they pay for a personal relationship with an advisor who not only understands their goals but is managing their portfolio in accordance with those goals.

The culture has changed

Of course, robo-advice did disrupt the wealth management industry. Consumers now have access to data, real-time service, aggregated platforms and many other tools.

This has caused financial advisors to have to go above mailing a statement. Now, clients want to co-create with you, they want to be involved, and they want to work with you.

So a major advantage of these investing platforms is that most of them don’t require a minimum amount of funds in the user’s portfolio. This means that investing is more accessible than ever before.

So instead of only serving 5% of the population, firms can offer self-service tools to anyone who wants to invest, so that someday, the invested funds can be taken over by an advisor if the client wishes to do so.

In other words: Wealth management firms have access to a bigger target audience. But It’s up to them to capitalize on this opportunity. Advisors have to clearly articulate how their services complement other investment channels for optimal portfolio performance.

Pros and cons of Robo-Advisors

Pros of robo-advice:

  • Less expensive than working with a financial advisor
  • Low account minimum
  • Easy to start
  • Low management fees

Cons of robo-advice:

  • Limited investment choices
  • Doesn’t take other investments into consideration
  • Limited flexibility
  • Limited personalization
  • Limited human interaction

Robo-advisors are usually a viable option for:

  • Novice investors.
  • Low net worth investors
  • Tech savvy investors
  • Investors who are looking for a passive form of investing

Modern professionals have shifted their way of thinking. It isn’t advisors versus robo-advice. It’s advisors and robo-advice. Both play a role in different stages of the investor’s lifecycle.

Redefine what it means to be an advisor

Many people are beginning to see financial advising as a commodity, viewing it as nothing more than a service with no real value to offer. This obviously isn’t true.

Financial advisors can overcome this false belief by having a clear value proposition that clearly outlines the unique value they bring to clients.

This value proposition should be:

  • Concise
  • Clear
  • Specific
  • Benefit focused

This can help to differentiate your services from the competition and make it easier for clients to understand why they should choose you over other advisors.

Once you’ve crafted your unique value proposition, you should use it when:

  • ✅Creating marketing collateral.
  • ✅Crafting your social profiles.
  • ✅Onboarding clients.
  • ✅Organizing your website.
  • ✅Onboarding employees.

💡A 10-year-old kid should be able to explain to another 10-year-old kid the value you provide. Keep it simple!

Annamaria Testani

Annamaria Testani

Head of Client Experience, IG Wealth Management

If your value proposition is stuff that a computer can generate by itself, you can’t blame people for thinking that your service is a commodity.

A chatbot can’t manage emotions

During the 2007 market correction, investors were nervous to say the least. Financial advisors were able to say “You know what, you need to calm down. There’s an auto-correction. There was a run on the market, let’s look at what you own and adjust.”

This type of rational thinking is what advisors get paid for!

For those who held their investments or doubled down, this one piece of advice helped them take advantage of the market correction instead of overreacting to it.

In other words: Financial advisors help people navigate through emotional instability caused by overwhelming amounts of data coming at them.

Stay ahead of the curve

In order to learn about:

  • The shift toward self-investing and democratization
  • The rise in robo-investing and automation
  • Data and analytics
  • Digital transformation
  • Improved customer experience
  • High-level solutions for financial services companies

Download ebook: Disruptive Trends in Financial Services: How to Adapt and Grow

4.3 / 5 ⭐⭐⭐⭐⭐

Elie Najm
Digital Marketing Specialist | Spécialiste du marketing numérique