How to Overcome the Threat Posed by Automated Investment Advice
New tools and competitors are forcing advisors to more clearly define the value they provide to clients.
Since the 2008 financial crisis, multiple innovative technology companies have been challenging the investment advisory status quo with direct-to-consumer automated investment services, typically for a price much lower than traditional investment advisors. Not surprisingly, the initial growth of these companies and the assets they manage, combined with the launch of automated offerings from established firms like Vanguard, has fueled significant concern among advisors. And it wasn't too long ago that many industry pundits were hailing automated or robo-advisors as the future of investment management--and the end of traditional human financial advice as we know it.
Yet the evolution of these automated services over the past five years--both in terms of the breadth of their varied fee and advice models, as well as their growth with regard to total assets managed-- indicates they've become less of a pure threat to traditional human investment advice. Instead, they represent the continued emergence of disruptive technology within the financial services industry that forces advisors to both adopt new technologies and clearly define the value they provide to clients above and beyond simple asset allocation.