Tech Tools

Bridging the Robo Divide

Learning from the experts and early adopters

by Laurence P. Greenberg

Mr. Greenberg is President of Jefferson National, innovators of the industry’s first flat- fee Investment Only Variable Annuity (IOVA) with the industry’s largest selection of underlying funds. To learn more, please visit or call 1-866-WHY-FLAT (866-949-3528).

The advisor industry continues to evolve as innovation disrupts the status quo.

Today’s advisors are tech obsessed, in search of new solutions to provide their clients with more sophisticated services and to make their practice more efficient and scalable.

Robo-advisors are one of the latest solutions to emerge. But are they a benefit? Or are they a threat? Research shows that the jury is still out.

To get answers and more insights from the experts and early adopters, Jefferson National recently hosted a panel discussion on “Bridging the Robo Divide” at the Financial Planning Association Annual Conference. Joined by David Canter of Fidelity’s Practice Management and Consulting Group, Tim Gilligan of Betterment Institutional, Alois Pirker of the research firm Aite Group, and recognized thought leader Michael Kitces of Pinnacle Advisory Group, we took a deep dive into this new wave of technology to give advisors practical guidelines and actionable advice.

There are many questions, even confusion, about how robos are defined, what they can provide, how they can be used and who they can benefit. In the end, the big takeaway from our panel was ‘Don’t think of robo-advisors as a new distribution channel or a new service. Instead, robo-advisor solutions should be viewed as another innovative technology that can be integrated into your practice.’ As for the decision to add a robo solution, it depends primarily on your own unique approach to running your practice and your strategy for growth.

No preconceived notions

When asked how early adopters use robo solutions, Alois Pirker of Aite Group noted “It’s a diverse set of service models. You might assume that it’s segmented to practices with smaller clients – but that’s not the only way it’s used.” He went on to say “It’s not just a question of small firm versus large firm. It is also a question of the advisor’s approach. The way they look at their practice – and the way that they look at technology.” Tim Gilligan of Betterment Institutional agreed, saying “Advisors should leave their preconceived notions at the door. By testing robo solutions across the clients in their practice, they’ll see how it can work for a wide range of clients, regardless of generation or net worth.”

Our own research confirms that when it comes to robos, misperceptions are common. While the general consensus among many advisors and media is that robo-advisors should be used for younger, less affluent clients – the robo reality is very different. According to Advisor Authority, a recent study commissioned by Jefferson National and conducted by Harris Poll, robo-advice is a tool for top advisors – those who earn more and manage more AUM. And these early adopters are more likely to use robos for affluent clients. In fact, more than 50% say they use robos for clients with more than $1 million in AUM, and 20% say they use robo solutions for clients with more than $10 million in AUM.

When asked to provide high level guidance for an advisor looking to add a robo solution to their practice, Pirker emphasized that “Integrating robo solutions into your practice is not tactical. It is a strategic business move that requires careful, forward-focused thought. How can – and how should – advisors change their business model through adopting technology?” Canter agreed, saying “It’s a business strategy question that starts with, ‘What problem are you trying to solve?’ Carefully consider and identify your value proposition. These digital solutions offer a fantastic opportunity to streamline portfolio management so that you can focus more on holistic planning and really express the value that planning brings.”

Client engagement and low-cost investment

Integrating robo solutions into your practice is not tactical. It is a strategic business move that requires careful, forward-focused thought

When asked to address the more practical aspects for integrating robo solutions into their practice, Gilligan noted that “It’s important to understand the optimal way to use a robo solution, from developing the right service model to establishing the right price point.” Pirker added that “The robo trend has the potential to help advisors innovate on two key fronts: client engagement and low cost investing.” Michale Kitces added “Ultimately, it comes down to who your clients are and what they’re realistically going to use. And it’s not a question of their age. If your client has an iPad – and most of them do – they’ll appreciate technology that makes their lives easier. As for us advisors, it’s having tools that help us run more efficiently.”

Taking the discussion to a more actionable level, David Canter provided these five core steps an advisor can follow to successfully integrate a robo solution within their practice:

  • Clearly identify your target client.
  • Consider how a robo solution will affect your business process and integrate with your existing technology.
  • Carefully work out how a robo solution fits with your overall investment process.
  • Work with – never against – your talent. Ensure you have buy-in from each advisor at your firm that a robo solution is the way to go.
  • Develop a go-to market strategy to ensure you are supporting your clients of today – and capturing your clients of tomorrow.

It’s not clear how quickly robo-advice will penetrate the advisory market. Our own Advisor Authority study shows that awareness is still low and adoption has been slow. But the consensus among our panel was that advisors who combine the right technology with guided advice will make the biggest impacts on their clients’ financial lives – and on their own bottom line. And our Advisor Authority study shows that the most successful advisors are doing just that. Those advisors who earn more and manage more in AUM spend more on technology-and use more technology – to make their job more seamless and achieve scale. They truly believe the only thing more expensive than adding technology is not adding technology.

And our panelists also agreed that there is still no substitute for the guided advice, holistic financial planning and human touch that an advisor can offer their clients. As Pirker said “There’s no one size fits all approach – you really need to listen to what your clients need and deliver on that. At the end of the day, clients expect meaningful communication.” Kitces may have put it best when he said the “Bionic Advisors” who integrate technology with human capital, will be able “to enhance their capabilities, run a more efficient and effective business, and do more awesome things for their clients.” Ultimately, it’s not about replacing advice – it’s about enhancing advice. ◊