Online investment advice has grown in recent years and it is a trend which is starting to worry many independent financial advisors who are worrying that their jobs might be on the line as the increasing popularity of an algorithm makes their business virtually redundant.
Some finance experts say there is no need for them to panic or worry just yet and that in the long run it might not do too much harm – at the end of the day, there are some people who will always want to deal with a real human voice and to talk to someone, rather than type into a chat box on a computer.
Wealth management businesses are estimated to hold around $27trillion in assets, but online advisory services are already starting to chip away at this. There are some investors out there who believe that advice should come cheaply and that is why they’re relying more on this type of service.
How an Online Advice Service Works By Comparison to Speaking Face To Face With a Financial Advisor
What will happen with this type of service is that you’ll go online to a specific financial service, you’ll be asked a series of questions which will work out how much of a risk they are, what they want to invest in and their ultimate aims. Based on the answers to these, these online financial advisors will be able to come up with a solution that suits the needs of the client.
The idea is that this kind of thing might appeal more to younger investors and people who are starting out with planning their financial future and want instant decisions. They might feel it is slightly “old-hat” to talk to someone face to face, when a computer can help them quickly. However, there will still be a need for face to face financial advisors to step up to the plate. They might need to look at how they charge for their services or how they structure them, so they remain relevant.
For instance, they might decide to lower the fees they charge for investment management services – something more people are likely to need, whilst increasing how much they charge for other more specialised services like estate planning.
Robo-Financer services typically still undercut face to face financial services – sometimes by up to a third, so steps might need to be made to make the latter more competitive still.
A second new innovation to the field of financial advisors is the Robo-Shield. It actually refers to how the staffing, practice management and streamlining changes that firms should be implementing to protect their business from the opposition that these robo-advisors represent.
One way businesses can do this is to make sure they all offer online services to their clients, so that they can always view their money and their accounts online at all times of the day. From this, additional services can be set up “behind the scenes” as it were, so that financial advisors can keep an eye on customer accounts and notify anyone of any changes that need to be made, or even things like suspicious transactions.
It’s The New Way Forward
The saying goes “if you can’t beat ‘em, join ‘em” and this might well prove true for many financial advisors, who seek to gain a new client base and maintain their old one. It’s true that it can take time to find the best online portal to use and that setting up might take some getting used to, but it could be a potentially lucrative way of securing new business.
Robo-Advisors Won’t Be Going Away Any Time Soon
The advice is generally to act now if you’re a financial advisor and you’re worried about how your business will perform as this type of service continues to grow. The finance industry is seeing a greater number of assets move to online and as this rises even further, some businesses might find it harder to adapt or to maintain their current presence to the level they would wish.
There are an increasing amount of investors who are starting up and will only rely on robo-services to help them. They might continue to shun traditional financial advisors. This is true more so of people who might be starting out with relatively little money to invets, but as more and more wealthy clients catch on to this idea it won’t be long before robo-advisors are where the real money is to be made.
The bottom line is that if face to face financial advisors want to stem the tide against online advice they need to think about restructuring their fees and making them more accessible for the wider public, and also think about what, if anything, in the way of more personalized services they can provide too.