The Robot will see you now!


lost-in-space-robot-2The evolution of technology over the past decade is drastically changing the landscape for advice-centered businesses.  Just look at how Travelocity has displaced the experienced travel agent and Zillow is fast becoming the realtor of choice for millennials.  And now those who peek into the future of financial services are warning that advisors must evolve their business models in order to compete with the emergence of online portfolio management platforms, commonly referred to as “Robo-Advisors.”

The principle behind Robo-Advisors is greater efficiency, lower cost and the consistency and objectivity in the advice driven by their algorithmic templates.  There is no doubt that this is quite appealing to the growing class of wealth accumulators who live online, utilize technology for almost every need and, thanks to vehicles like ETF’s, view investment solutions as mere commodities.

With almost thirty-five years in the wealth management field, I would agree that certain business models will soon be facing significant margin pressure from the emergence of the Robo-Advisors; especially those that are transaction centered or narrowly focused on proprietary research and security selection to “outguess the street.”

However, I do take exception to the notion that clients will also place a lesser value on holistic financial advice.  Extreme shifts in market valuations lead to undue euphoria or panic.  Tax and estate planning rules seem to be constantly changing, and generally speaking, life happens.

A value of the personal service advisory model, like that of Legacy Trust, will always be in the ability to demonstrate empathy (computers are indifferent to emotion), creativity of recommendations and agility to “think on your feet”.  Computers unfortunately must follow the code.

Each client’s goals and circumstances are unique and evolving.  They cannot be solved merely by impersonal algorithms.  The value associated with client trust and loyalty is when professional advisors demonstrate a thorough understanding of those unique dynamics and bring real world experience to recommended solutions.