Why financial advisors should embrace robo advisors
Robo advisors
Posted by MoneyController on 29.03.2021
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Robo advisors are wielding greater influence over the financial advisory business and Destination Retirement’s newest robo advisor is another prime example. The service launched by Destination Retirement intends to help pension providers, corporate advisors, and employee benefits consultants provide better services to their clients. It offers whole-of-the-market annuity advice as well as advice regarding ISAs and other investment accounts. In some cases, the service also offers additional technical advice for some clients such as those with a terminal illness or shortened life expectancy. The launch represents a global trend in firms incorporating technology into their business model. Robo advisors offer many benefits, including enabling firms to reduce the cost of advice for the client, a benefit that solves one of everyone's biggest headaches.
Lower cost
A common argument that advisors use when defending their own work against robo advisors is that a machine cannot think the same way as a human does. However, this argument isn’t particularly strong. It is true that the algorithm may not replicate the performance of the best advisors. However, they can offer similar service at a fraction of the cost. If advisors can automate advice to the majority of their clients, they can focus their time on a smaller pool of clients. The algorithm requires minimal supervision and upkeep; and even if it does induce costs, they will be dispersed and absorbed over a large pool of clients.
Tapping into new clientele
Instead of downplaying the effectiveness of robo advisors, financial advisors can use them to tap into new clientele. Many people with limited assets would welcome advice from top professionals. Currently, this isn't possible as it is not financially feasible for clients or advisors. But when fees are so low that asset size no longer matters, new clients will start heading to financial advisors. Only robo advisors can make that cost reduction possible.
Adapting to the future
There is no doubt that the most successful people today are those who have managed to adapt to the ever-changing technological landscape. In the future, the best advisors might well be those who can work side by side with technology, allowing technology to calculate the optimal scenario for their clients and then using their own judgment and expertise to guide the client through that scenario.