Advice Firms See Virtual Model as a Positive

A recent poll of advisory firm executives, conducted by Fidelity Institutional, shows 74% of broker/dealer and RIA firms see the emergence of virtual financial advice platforms and low-cost online investment management services as a positive industry trend—and one that is here to stay. However, 54% of executives polled also felt digital advisers cannot replace the human element of advice.  

When asked for one word to describe digital advisers, advisory firm executives described the new models as “needed” and “complementary,” but with the potential to be “disruptive.”

The poll complements previous research showing two-thirds of mass affluent investors prefer a face-to-face relationship with an adviser. Together, the two pieces of research suggest firms have an opportunity to blend the best practices of the digital advice model with human touch to prepare for the next generation of investors, Fidelity says.

“Firm leaders should evaluate the wide range of new models emerging and identify which elements may be useful to embed into their advisers’ practices,” explains Sanjiv Mirchandani, president of National Financial, a Fidelity Investments company. “Overall awareness of digital advice solutions is low right now, with our poll showing that only 13% of executives are feeling very informed about the models. So, education is the first step.”

While the firm leaders polled agreed that the impact of these new models will equate to positive changes for clients in the advice industry, they shared reservations regarding greater confusion about advice options and increased regulatory scrutiny, Fidelity says. Executive respondents frequently cited concerns over whether regulators will be able to effectively oversee these new models.

The executives polled saw digital advisers as having the greatest impact on the availability and cost of advice for mass affluent investors and raising investor demand for technology, Fidelity says.

According to the poll, many executives are already incorporating some of the digital adviser best practices and solutions into their businesses in order to engage the next generation of investors. A majority of executives report that they are using technology to drive collaboration and ease of doing business (52%). Others are using lower cost investments in portfolios (46%); offering do-it-yourself tools for goal planning, asset allocation, etc. (22%); and lowering minimum asset levels (20%).

Fidelity Institutional took the poll during the firm’s annual Executive Forum client event, held in early May. The event was attended by more than 300 industry executives, most of whom are clients of Fidelity’s custody and clearing units.