Rise of the Machines

Whether it’s a young Arnold Schwarzenegger breaking through a wall or a space station turning against you, the machine takeover has been on the minds of many people for years. Until recently, it all seemed like a fantasy. Today, however, financial advisors all face a new challenge: the rise of the Robo-Advisor. Robo-Advisors may not be as smart as Rosie from The Jetsons, but they are making a significant impact on the industry today.

From your phone, you have the ability to find a number of robo-advisors with a quick search in the app store. After you download one of them, within minutes you can be signed up and know that your money is going to be well invested. At any given time, you can reach into your pocket and open the application to see the status of your money, including information such as where the returns are slow and where they’re nearly guaranteed. Today there are tens of billions of dollars under the management of robo-advisors. If that isn’t the equivalent of a positive Yelp review, it’s difficult to imagine what is.

The one-size-fits-all approach to investing

Robo-Advisors follow a sizing model, meaning they take your investment and goals and then throw them into the “sizing bucket” for what you are looking to accomplish. You are given a number of options to choose from, each of which aims to place your funds into a series of surefire investments based upon your responses and a sophisticated algorithm. You don’t really have a say in the matter, and you can’t exactly speak with anyone directly, but it’s not like you’re paying more than 0.25% annually of what is being managed.

Let’s look a bit closer at what’s happening here: we have an application-based investment product that charges users a tiny amount of money on an annual basis with nearly guaranteed returns. This level of convenience is perfect for individuals from younger generations who don’t yet have the funds or confidence to work with a real-life advisor. Plus, it certainly opens the gate for technology to provide better options for the individual advisor — think Jemstep, which enables an advisor to handle multiple clients in a manner similar to the robo-advisors’ approach.

With the DOL changes right around the corner, you can rest assured that there are companies looking to develop technology to resolve the potential problems around working as a fiduciary. Robo Advisors will have less to worry about and you can count on the fact that people will continue to work with applications that are so simple yet that still have their best interests in mind.

Technology: it’s not everything

One thing will always hold true: real-life relationships matter. As technology becomes more accessible, more and more people are going to want their money to be managed. As portfolios grow, so will needs, and independent advisors are the only people trained and licensed to handle those needs. There’s a giant market for technology behind the advisor, and you can count on that growth to continue with every change the industry goes through.

The best way to compete with a robo-advisor is to stop looking at it like a competition. Technology and people provide very different things, but, combined in the right way, together they can result in a highly efficient solution or process complete with a voice on the other side of the phone that cares. Rather than picking a side, utilize a CRM like Redtail to identify all of your contacts categorically in order to maintain healthy relationships. Use workflows in-office so you can more efficiently track all of your tasks logically, thus making sure that all of your client requests are completed. In the end, you can count on innovation to keep you on track, while still being able to inject the personal touch your clients need.

Jeremy Nakano
Jeremy Nakano
Jeremy Nakano is a Subject Matter Expert for Redtail Technology. As a trainer, Jeremy has a great passion for teaching people how to effectively use software. He has over 5 years of experience in the Tech Industry, having spent 3 of them with Constant Contact.

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