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Time for an Industry-Wide Sanity Check on Robos

By Thomas Coyle March 31, 2017

Everybody knows robos are a thing these days. But what that thing really is eludes many advisors and the firms they rely on for support, says one prominent wealth industry expert.

This uncertainty doesn’t stop the robo bandwagon from getting more crowded — with those aboard holding firm beliefs they know what they’re doing.

But as an old advertising adage goes — “people don’t want drills, they want holes” — Kendra Thompson of Accenture’s wealth management consulting practice says most robo-platform sponsors focus too much on technologies and too little on outcomes.

“They’re trying to sell the drill and not the hole,” Thompson tells FA-IQ. “It’s not sustainable to focus on each new bell and whistle — you have to have a thoughtful value proposition.”

Recently Wells Fargo, Raymond James and T. Rowe Price have either launched robos or provided more detail on upcoming robo offerings. Goldman Sachs let word slip of its own robo-charged plans to reach down-market investors in a help-wanted posting.

These players join Merrill Lynch, UBS, Schwab, Fidelity and BlackRock among others. Morgan Stanley plans to join the gang later this year.

For all this robo activity — and with more undoubtedly to come as smaller players get into the act — Thompson thinks many industry participants risk spinning their wheels as they become enamored with the means and lose sight of tangible ends.

“The dialogue around robo has distracted a huge portion of the industry from seeing this for what it is: an opportunity to scale wealth management delivery,” she tells FA-IQ. “All the pieces around robo and digital are just capabilities.”

“The future of today’s incumbent brands depends on them getting this right.”
Kendra Thompson

And Thompson asserts most clients don’t care about things in those terms. “They want the experience of access and convenience,” she says. “It’s less about hot new fintech and more about what clients want and are willing to pay and how to deliver it.”

In other words, robos are a “how” for consumers, not a “what.”

This is a crucial point for Thompson, who says she’s passionate about opening “the minds of executive teams” when it comes to making best use of their robo-advice platforms.

And getting their minds open quickly is urgent, Thompson adds. “The biggest change I’ve seen in the last year when it comes to robos is that client demand is increasing, so there’s a lot of pressure on providers to meet that demand.”

To help these executives get a better sense of the market’s robo priorities, Accenture is out with a new report called “The New Face of Wealth Management: In the Era of Hybrid Advice.”

As the title implies, Accenture sees humans inextricably tied to robos for delivering holistic wealth management services, whether or not individual clients want the whole enchilada.

Kendra Thompson

The consulting firm’s survey of about 1,300 U.S. and Canadian “emerging wealthy” and high net worth investors found that 68% of them prefer hybrid investment advice over either a dedicated human advisor or conventional robo-advisory services alone.

Accenture defines hybrid in this context as a “combination of traditional advisory services and low-cost digital tools.” It defines robo as “computer-generated advice and services without human advisors.”

For Thompson, “the robo-versus-human-advisor debate has lost relevance for investors and wealth and asset managers in North America.” Investors clearly “want a combination of automated and human advisory services and significant numbers of Millennials and Gen Xers have already turned to hybrid services.”

And hybrid users may be better life-cycle customers. They’re more likely than those using only traditional or entirely automated services to say they proactively seek and receive assistance on financial planning, according to Accenture. They’re also more likely to ask about their families’ financial needs with their advisors — including estate and tax planning and financial issues around eldercare.

A hybrid approach to robo can also help firms work better with women — a plum demographic not just because of numbers, but because women have characteristics that make them good wealth management clients.

“They’re willing to listen, eager to learn and willing to delegate,” says Thompson. “Empowered women want advisors to understand their life pictures and financial journeys rather than just their investments.”

As a result, “designing a rich advice experience for women will pay off — and the report confirms it,” Thompson adds.

But firms aren’t seizing this opportunity — or adopting a sufficiently broad view of their robo opportunities.

“They have to understand the work isn’t done because they’ve launched a robo,” says Thompson. “That’s just the first step; from there they have to refine and revise as they go because the future of today’s incumbent brands depends on them getting this right.”