PANC 2016: Advice and Robo Advisers

In moderating a PLANADVISER National Conference panel discussion on robo-advisers, Jeb Graham, retirement plan consulting partner with CAPTRUST Advisors, asked a direct question of the attending advisers: “How big of a disruption do you expect from robo adviser competition?”

The flash poll showed most feel robo is only minimal to moderate threat today, and looking out five years it will be about the same, despite the likely entrance of more and more technology providers into the traditional financial advisory domain.

According to panelist Jeffrey Hemker, national sales manager in the retirement division at Invesco, advisers seem to have grown at least somewhat comfortable with the idea that robo will be a source of competition. But many advisers are also coming to view robo in a fundamentally different way, he said, understanding that the best parts of robo can be folded in to support the traditional adviser.

“If you remember years ago, internet banking was really something that seemed new and different,” Hemker explained. “You may even remember the story of Netbank, which was a tech startup that was going to totally disrupt everything we knew about brick and mortar banking. Well, what’s the case now? The big traditional providers have found their own ways to embrace digital banking and basically beat the disruptors at their own game. Netback, for example, has gone out of business while many traditional banks are thriving thanks in no small part to digital technology.”

Jylanne Dunne, a senior vice president for Fidelity’s clearing and custody solutions business, agreed wholeheartedly with that assessment. She observed that, even during this time of major regulatory shifts, she actually gets far more questions on robo-advice than on any other subject. Many advisers come to the conversation with serious concern, only to come away with new ideas about how to make digital advice work for their practices and clients.

“Our partners come in and they want to know, what does the rise of robo mean for me?” Dunne said. “Where we start the discussion is by asking, what problem are you trying to solve? We let them know right from the beginning that robo-advice can be just as much an opportunity as it is a challenge or hurdle.”

NEXT: The robo-advice spectrum is wide 

Hemker observed that he has already seen many traditional retirement adviser and investment firms successfully embrace different elements of robo—including his own firm, which recently acquired the robo adviser platform Jemstep.

“We are a great example of how robo can complement the traditional services of advisers and investment providers,” he suggested. “Jemstep offers robo adviser service to advisers rather than directly taking over and managing assets. Previously it had been an online automated investment platform as well, before shifting gears to offer its software instead.”

Dunne agreed with the sentiment: “One adviser we work with has recently started bringing in digital planning tools—which many would classify as robo-advice—to enrollment meetings. It’s an opportunity to create an interactive, technology-based planning experience right from the start. A lot of wealth managers are figuring out where they want to be on this spectrum. At one end it is full self-service, and on the other end the adviser is still very much front and center, simply leveraging new pieces of technology where possible.”

Both Hemker and Dunne suggested that finding new successes via robo-implementation “will always be about leveraging the technology to support better discussions between clients and advisers.” In other words, there’s very little reason to think that robo advisers will be able to wholly disrupt the role of the traditional adviser in the way some seem to want to.

“We believe technology is changing the customer and the adviser experience for the better,” Dunne concluded. “We will continue to work with firms to consider their technology and how it’s perceived by clients. The more successful advisers are on these measures, the better their firm performance is on average. I think it goes to show we can all coexist together and together we can create more wealth and reach more investors.”