Today's Advisory career

Staying Relevant in the “Robo” Era

Surprise! For financial guidance, even tech-savvy Gen-X still prefers the human touch

by Katie Libbe

Ms. Libbe is vice president of Consumer Insights for Allianz Life. Visit

Over the past year, much has been written and discussed about the digital revolution within financial planning via the growth of online financial advice, better known as “robo-advisors.”

There’s no doubt that this trend is on the rise. Deloitte Consulting noted that use of robo-advisors had increased by 65 percent to $19 billion in assets under management managed as of year-end 20141 and management consultant firm AT Kearney predicted that robo-advisors will control in excess of $2 trillion by 20202.

But does this mean the traditional client-advisor relationship is now a thing of the past? Definitely not – particularly for financial professionals working with Generation X and baby boomer clients.

Although it’s difficult to predict how younger generations will choose to do their financial planning in the years to come, for now, Gen Xers and boomers – those with a majority of assets – say they still prefer the human touch.

According to the recent Allianz Generations Apart study, only 10% of each generation said they would be comfortable having their relationship with their financial advisor exist entirely online. Why? Trust remains a key issue.

The Distinction of Personal Relationships

When asked about engaging robo-advisors, nearly seven in 10 (69%) from both generations indicated they “don’t really trust online advice, making personal relationships more important.” Additionally, more than three-quarters (76%) believe “there’s so much selling online that it’s hard to trust the financial advice.”

This lack of trust is an important factor in the larger discussion because, without that barrier, boomer and Gen X preferences may be trending the other way. Both generations admit to having an interest in online resources and many are currently using the Internet for at least some of their regular financial activity.

The Generations Apart study revealed that more than half (57%) of both generations spend about 1-3 hours a day online outside of work and 40% said they “regularly” visit financial websites, with 13% making daily visits and 22% doing some trading/investing online. For some, this increase in online engagement affects their opinion of professional financial help, with 42% of respondents agreeing that “there’s nothing a financial advisor can tell me that I can’t find out online.”
Leveraging the power of long-term relationships

With more robust technology becoming available every day, it’s clear that many people are getting increasingly comfortable with some aspects of online financial planning. So what can financial professionals do to stay relevant to their boomer and Gen X clients?

The key is in leveraging long term and retirement planning expertise – support that would be difficult or impossible to obtain solely online via robo resources. Although most robo-advisors can do a fine job of asset accumulation and allocation, they lack the ability to truly understand the client’s goals – both short and long term – and create detailed financial plans that can address specific, changing needs that face Gen Xers and boomers as they plan for retirement.

The key is in leveraging long term and retirement planning expertise – support that would be difficult or impossible to obtain solely online via robo resources

According to the survey, the most valuable things that boomers and Gen Xers said a financial advisor currently does or could do for them include: “helping me plan, set and achieve long-term financial goals”, “making sure I have enough money to last as long as I live,” and “helping me understand the big picture for my money (spending, saving, and retirement).”

This is the type of advice and financial coaching that a financial professional can provide only after spending a significant amount of time with their client so they can better understand everything necessary to provide an appropriate financial strategy for that individual.

Setting yourself apart

Expanding on this idea, the following are some key services that set financial professionals apart and may keep the rise of robo-advisors at bay:

  • Risk tolerance
    While most robo-advisors have new clients answer questions about their risk tolerance in order to build that client’s investing and risk profile, those questions are typically generic and don’t go into much detail about what’s driving that person’s financial planning preferences. In addition, it’s possible that a client’s risk tolerance may not be a good match for helping them achieve their stated goals. This gap would likely create the need for a human advisor to explain the need for a change in strategy. For example, a risk adverse client may need to embrace more risk if they had to substantially increase their assets, or a client with a high appetite for risk may need to be convinced that a more conservative portfolio may be appropriate if they are closer to retirement.
  • Insurance/protection needs
    Although wealth accumulation is certainly important, it is only one component of a holistic financial strategy. The foundation of a good strategy should first address guarding against uncertainty, which includes addressing insurance and protection needs. Financial professionals can help determine appropriate insurance solutions for a client’s specific situation to ensure they are adequately protected and truly have the investable assets to use for achieving their other financial goals.
  • Taxes and Social Security
    At this stage in their lives, both Gen Xers and boomers should be thinking about efficient tax and Social Security filing strategies that can help them take advantage of every opportunity to enhance their financial security. Decisions about how and when to take Social Security benefits can make a significant impact on the amount of income people can receive in their retirement years. Similarly, tax issues should be considered when evaluating the future value difference between a taxable financial vehicle and a tax-deferred financial vehicle. These are topics that financial professionals with specialized knowledge, along with the advice of a qualified tax advisor or attorney, are in a better position to help clients address.
  • Distribution/Retirement income
    As noted above, robo-advisors can be very useful in helping people with asset allocation during the accumulation phase of a financial strategy, but are not equipped to help people figure out what to do with their money once they stop working. This is an essential part of the financial planning process because, in order to feel truly confident, clients need to know that their money will last as long as they do. Financial professionals can help their clients can gain a better understanding of different distribution strategies and what solutions might be appropriate for them.◊




1. Deloitte “Robo-Advisors: Capitalizing on a growing opportunity,” 2015
2. AT Kearney, “Hype vs. Reality: The Coming Waves of “Robo” Adoption,” June 2015