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Six ways that human advisors kick robo-advisor butt

You can't hug a client with robo arms -- or confer peace of mind, offer actively managed or alternative investments, help build a legacy...

Author Guest Columnist John Drachman February 6, 2015 at 8:01 PM
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John Drachman: Can it now be said -- if a robo-advisor could speak to its human counterpart -- 'I can do anything you can do?'


Dave Ross

Dave Ross

February 6, 2015 — 8:56 PM

I believe that some human advisor can and will kick the Robos butt. Unfortunately most don’t have a well defined value proposition, and systems and processes to make sure they can back up what they are saying. Today most advisors fall short on professionalism and are focused on closing a client as opposed to the long term relationship. And if they do have long term relationships they aren’t focused on the 6 things that are highlighted above.

Lets be honest, the advisor has been told for the last 20 years that they are “asset gatherers” and they should outsource the management of the money and all they should focus on is the relationships they build—tickets to ball games, dinners, etc. This era is officially over and the number of advisors that can adapt will be interesting.

As a consultant to this industry and speaking to hundreds of advisors a month, I routinely ask them if things got tough how many of the advisors in their office would survive. The answer is typically about 20%. I predict in 5 to 8 years this is the reality.

Those that do survive will thrive.



February 6, 2015 — 10:14 PM

Well said Dave.
Another point is obviously there is very little to write about in this industry, the press slobering over ROBOs they get reminds me of the technology line “ it is always overestimated in the short term and underestimated in the long term”. I would think the most interesting story about ROBO advisors is with several of the biggest of them starting back in 7 years ago and with 1/2 Billion of VC money behind them why is 19B AUM so impressive. Particularly with Vanguard raising $4B in a year long pilot program and they haven’t even moved down market yet. Probably because the trade press has little imagination to find out what is really going on as Dave discussed. As Dave said we are reaching a tipping point where the tide is going out on the industry that offers investment “advise” that is nothing more than marking up a TAMP and VC backed ROBO advisors whose technology is easily replicated by major brands like Vanguard and Schwab. But in the short term I am sure that TAMPS, Active Mutual Funds, Smart Beta and Liquid Alts as well as ROBOs will all continue to be good advertisers.



February 9, 2015 — 1:33 PM

Two great comments- a few of our thoughts:

The challenge of the 'robo advisor’ to many mainstream advisors is very real. So, in order to stay relevant in the marketplace everyone has to 'up their game’. That will take resources, processes, definition, demonstration, documentation etc. And, as importantly will take a different mindset-

Advisors also, it seems, need to 'up their game’ in a scalable manner in order to build the quality and character of their business. Not so easy but definitely achievable.

Finally, advisors could develop scalable, distinguishing, defendable, repeatable and ultimately transferable processes (if/when they want to sell, merge, or acquire). Sound tough but it’s not…same kind of transformation the money management business went through in late 80’s and 90’s.

So, in our view the challenge for the advisor is to evolve into a process orientation which 'ups their game, is scalable, and away from a people centric business built on great seats and thick steaks!

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