There has been a proliferation of internet investment advice platforms occurring over the last few years that has some financial advisors nervous about the future of their business. These platforms, which have become known as “robo-advisors,” use specific algorithms to issue financial advice for clients. Other advisors, however, say that such fear is unwarranted and that robo-advisors cannot possibly take over the entire industry.
Many also say that one of the main reasons that robo-advisors will not be able to run human advisors out of business is because there is more to the advisement profession than simply doling out advice.
One of the main components of the financial advisor’s job, they say, is the establishment and ongoing development of personal relationships with clients. That is something that obviously computers and software programs cannot replicate. The reality, however, is that these automated advisory platforms are popular enough that they have become a factor in the industry to such an extent that advisors are beginning to make adjustments to their repertoire. What kinds of adjustments?
The key, many advisors say, is staying relevant with younger clients who have the potential to become wealthier clients over time if they are not already. One way to do this is by lowering fees that advisors charge for their investment management services. They can recoup whatever profits they may lose by raising the fees that they charge for more specialized services like estate planning later on in their working relationship with the client.
Being more transparent about pricing is something that many advisors feel needs to occur industry-wide and making fee adjustments that reflect lower standard fees than robo-advisors are charging is one way to effectively kill two birds with one stone, as many in the industry see it. Lower fee schedules, it is believed, would attract and maintain more young clients and make the industry more accountable to them through such transparency.