No, robo advisors are not the end of the independent investment advisor. No matter what level of investment sophistication a client may have, dealing with actual people is better than plugging in retirement dates and income goals into a software program and getting an asset allocation model for half the price of a standard management fee.
“Thinking that robo advisors spell the end of the RIA is like saying WebMD means we no longer need nurses,” says James Poer, president and CEO of Kestra Financial in Austin.
Kestra is not afraid of the “robots”. They have a number of robo-advisor systems they sell to firms, like their AdvisorEnterprise and AdvisorComplete. These are basically just proprietary software solutions (everything is a “solution” in the IT world) designed to lower costs, and streamline trading and asset allocation modeling.
What was initially defined as the “robo advisor” has evolved over the years. It’s always been a low cost path to passive portfolio management, putting clients in index options and occasionally rebalancing a portfolio automatically at a low price point. But the pure robos that burst onto the scene soon realized that investors need more than that. It’s one thing to know you need to save for retirement, it’s another thing to understand how taxes impact savings, or learn about other vehicles for things like fixed income and even private equity.
“By and large, the RIAs we work with see these as tools better suited for smaller investors,” Poer says. “We serve upstream, sophisticated advisors and they tell us that they use the asset allocation aspect of these solutions to serve younger clients without having to really get into long term planning and education,” he says.
Most advisors today have these platforms already, a sort of one-stop shopping for investors that don’t require much hand holding, and already have an idea of where they want to put their money to work. These are not new tools. Despite the attention these disruptive robos keep getting, there is not a lot of money under management on these platforms, Poer says.
“I remember a couple of years ago we had forty of our financial advisor clients in a room and we gave them these huge poster boards and asked them to design a robo advisor,” he says. “We wanted to know how they would use it. It would help us launch products for them. But only two said they would use it to grow their business. Most use it as an auxiliary. The talk about robo advisors outweighs the reality of their success. They won’t replace humans. People still matter in wealth management.” Robo Advisors Won’t Kill The RIA
No, robo advisors are not the end of the independent investment advisor. No matter what level of investment sophistication a client may have, dealing with actual people is better than plugging in retirement dates and income goals into a software program and getting an asset allocation model for half the price of a standard management fee.
“Thinking that robo advisors spell the end of the RIA is like saying WebMD means we no longer need nurses,” says James Poer, president and CEO of Kestra Financial in Austin.
Kestra is not afraid of the “robots”. They have a number of robo-advisor systems they sell to firms, like their AdvisorEnterprise and AdvisorComplete. These are basically just proprietary software solutions (everything is a “solution” in the IT world) designed to lower costs, and streamline trading and asset allocation modeling.
What was initially defined as the “robo advisor” has evolved over the years. It’s always been a low cost path to passive portfolio management, putting clients in index options and occasionally rebalancing a portfolio automatically at a low price point. But the pure robos that burst onto the scene soon realized that investors need more than that. It’s one thing to know you need to save for retirement, it’s another thing to understand how taxes impact savings, or learn about other vehicles for things like fixed income and even private equity.
“By and large, the RIAs we work with see these as tools better suited for smaller investors,” Poer says. “We serve upstream, sophisticated advisors and they tell us that they use the asset allocation aspect of these solutions to serve younger clients without having to really get into long term planning and education,” he says.
Most advisors today have these platforms already, a sort of one-stop shopping for investors that don’t require much hand holding, and already have an idea of where they want to put their money to work. These are not new tools. Despite the attention these disruptive robos keep getting, there is not a lot of money under management on these platforms, Poer says.
“I remember a couple of years ago we had forty of our financial advisor clients in a room and we gave them these huge poster boards and asked them to design a robo advisor,” he says. “We wanted to know how they would use it. It would help us launch products for them. But only two said they would use it to grow their business. Most use it as an auxiliary. The talk about robo advisors outweighs the reality of their success. They won’t replace humans. People still matter in wealth management.”