If you have been keeping up with the headlines, you’ll know that robo-advice services are changing rapidly. We’re seeing more capabilities for institutions and advisors, including the ability to integrate with multiple custodians and generate cross-client practice summaries. There’s even talk of expansion beyond exchange-traded funds (ETFs).
In my last post, I talked about current robo-advice capabilities. Today, we’re looking further down the road to see how emerging technologies like cognitive computing will power major advances in the future. For the sake of comparison, let’s consider the same four areas of the client-advisor lifecycle:
Understanding client needs: We expect to see big gains in how the technology understands client needs and preferences, including the ability to account for multiple investment goals (e.g., college savings, home purchases, health care, retirement). That will translate into significant improvements in its ability to propose wealth management solutions that make sense.
Proposing solutions: As I mentioned last time, this is an area to watch. Robo-advice is making huge leaps forward in how it allocates assets, selects securities and generates proposals for individual clients. Before long, it will be able to incorporate individual securities and ladder bond portfolios, and take into account low tax basis holdings and illiquid positions.
Implementing solutions: Today’s robo-advice services do a good job of opening accounts. Expect to see that same level of capability applied to asset transfer in the future.
Monitoring results and adjusting strategies: We’ll continue to see improvements in how robo-advice services deal with regular performance reviews and deliver dashboard metrics, but the big story here is in the area of market updates and research.
Tomorrow’s robo-advice services will be able to interact with clients in a multi-step way, adapting questions based on earlier responses. They’ll be more sophisticated and the solutions they propose will be more complex.
What does it all mean for human advisors?
Read the report.
Sure, certain aspects of the robo-advice experience—the lower cost, the privacy offered by a digital solution, the sense of involvement in the process—are attractive to many investors. But one can never underestimate the importance of personal connection, particularly as an investor’s wealth and needs grow. For that reason, I don’t see traditional advisors disappearing anytime soon.
Instead, the challenge for wealth management firms lies in creating a unified advisor experience that seamlessly integrates the very best of both human advisors and their robo-advice counterparts. Kendra will pick up the conversation there next week when she examines how firms can successfully incorporate robo-advice capabilities into their business models.
To learn more, read: