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No one wants to believe their job can be done as well or even better by a machine — financial advisers included.
Even those advisers who are most enthusiastic about new technology have yet to plug small accounts into robo models or use new hands-off options to attract younger investors to their practice.
Most in the field also find it hard to envisage a situation in which money will be managed and rebalanced — possibly using exchange traded funds — without their oversight.
“I would be surprised if it becomes a part of my business. We have other ways to attract millennials,” says Patricia Baum, a Maryland adviser with RBC Wealth Management who has $1.3bn in assets under advice.
“The relationship is the biggest part of the business and with a robo-adviser you lose that. I may be a dinosaur, but I just don’t see it,” she adds.
Several big broker-dealers in the US have, in the past couple of years, invested in technology that could create an automated advice service. These include Bank of America Merrill Lynch, Morgan Stanley Wealth Management and Wells Fargo Advisors.
Raymond James Financial has crafted a Connected Adviser technology platform which puts robo elements — such as rebalancing tools and automated updates — into its advisers’ systems. It includes input from the AgeLab at Massachusetts Institute of Technology as well as personalised notifications on client events and changes.
It did this rather than create “a competing internal division”, says Mark Thompson, a Florida adviser for Raymond James who has $430m in custody assets at the company and who sat on the broker-dealer’s technology advisory board.
Raymond James is “putting the robo-advisory options at our fingertips”, he says. “Allowing us to pick and choose what we want and what we don’t” makes it easier to integrate into practices. He acknowledges that “our productivity needs to go up exponentially for us to deliver the same kind of client experience” given the heightened attention on fees from US investors.
However, he adds: “There’s nothing like that human voice and human touch in a [volatile]month like February.”
The Raymond James approach looks to have made its advisers more ready to accept the deployment of these computerised services.
Margaret Starner, of Coral Gables, Florida, is part of the broker-dealer’s network and says she can see a time when automated advice is a stage in a person’s investment life. “I think it’s really going to be great for people who are smart and start saving and investing right when they start working,” she says. “That’s a market that has been overlooked a bit.”
Others cannot see beyond an entity that could take away critical parts of their jobs.
“Robo-advisers, to a certain extent, are our competition,” says Alex Sugar, who works for RBC in Boston and has $800m in assets under advice.
His practice only takes on accounts of more than $5m, so the idea of letting younger investors sit in a robo-program until their savings reach that level seems impractical.
RBC had signed up to work with BlackRock’s FutureAdvisor platform but pulled out last May. Instead it is piloting a robo called RBC InvestEase, which is currently only open to people living in Ontario, Canada.
The initial lack of enthusiasm for robo-platforms could be a reflection of the fact that many advisers have an established older clientele and are themselves nearing the end of their careers. This means there is little incentive to integrate with a service designed for younger, less affluent investors.
The technology itself has come a long way. Tristan Caudron, of Washington DC, an adviser in the Wells Fargo network, started in the financial advice industry in 1995. He was surprised how poor the technology was and sought to make changes — which originally meant using services such as email.
The robo-program from Wells has yet to make it to his office, and he admits he is “not exactly sure how we’d use that robo-solution when it does become available”. Caudron’s practice, which has $1bn in assets, has taken on accounts that were previously in robo-offerings from the start-up Betterment and larger custodians Vanguard and Fidelity.
“We’ve seen people hit their mid-40s, and say: ‘Gosh, this is great, but I really need a cohesive financial plan,’” he says.
“It’s generally a nice transition, so I can see how a firm like Wells or another broker-dealer can look at it and believe they can offer the same service and keep people in-house for the entirety of their financial lifespan.”
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