Practice Management

Digital Advice Delivery Has Both Perks and Limitations

“It is essential for traditional financial advice providers to view digital advice delivery not as a force that will displace them, but instead as a way to deliver deeper levels of advice to a wider client base.”

By John Manganaro editors@strategic-i.com | November 09, 2016
Page 1 of 2

A new analysis from Cerulli Associates projects the digital advice market will exceed $83 billion by the end of the year, with no sign of slowing growth through the end of the decade.

Still a small market segment compared with other advice pathways, the digital delivery segment is an increasingly important center of innovation and forward-thinking business development, according to Cerulli’s report, “U.S. Retail Investor Advice Relationships 2016: Embracing the Robo.” As the title indicates, the report is mainly focused on the practices of the retail advice market segment, but the findings are still applicable for defined contribution (DC)-focused firms.

“We believe that it is essential for traditional financial advice providers to view digital advice delivery not as a force that will displace them, but instead as a way to broaden their opportunity to deliver deeper levels of advice to a wider client base,” says Scott Smith, director at Cerulli. “The question is not whether traditional firms will offer digital engagement platforms, but which will best connect their advisers to clients in ways that highlight the value of advisory services beyond commodified aspects of portfolio management.”

The Cerulli research observes that growth for robo-advisers is strong now and will likely remain strong for some years to come, but at the same time, it is becoming increasingly apparent that robo-advisers “are not necessarily the fundamental disruption that the traditional financial industry has been concerned about.”

“Instead, they are a catalyst moving traditional advice providers into the digital age, used as an additional tool for enhancing the client service experience,” Smith contends.

Against this backdrop, the Cerulli report highlights that investors still perceive advisers who can understand life complexities and help set unique and individualized investing goals as highly valuable.

NEXT: Human advice remains crucial