From voice assistants to drone delivery, robots and automation are everywhere. And the financial services industry isn’t immune. Recently, robo-advisors have become increasingly popular, offering a convenient, tech-driven approach to investing.
A robo-advisor is any digital platform that provides automated investment and financial planning services conducted by an algorithm and without human supervision. Many robo-advisory platforms streamline processes by having investors input data about their financial situation, risk tolerance, and goals themselves and then letting the algorithm make investment decisions on their behalf. Robo-advisors are accessible and tend to be significantly less expensive than many human advisors.
Robo-advisors are also popular — especially among younger investors. According to one survey, 20% of affluent millennials use robo-advisors, compared to only 9% of investors aged 47 to 54. This small (and growing) percentage of millennials also represents a large generation of newer investors, signaling their potential revenue streams for advisors. The robo-advisory market, currently valued at $9.5 billion, isn’t going to stop growing anytime soon. Future projections anticipate a robo-advisory CAGR of 29%, worth $72 billion, by 2032.
In a competitive market, robo-advisors create yet another competitor for human advisors. How can advisors stand out from robo-advisors? By leaning into the human characteristics that make them unique. Here are three ways to offer human services:
Build Trust
Trust is the foundation of a strong client-advisor relationship. Unfortunately, one survey found that half of Americans are more likely to trust robo-advisors than traditional human advisors. Human advisors can combat the growing distrust by focusing on building relationships and showcasing their credibility and uniquely human skills. Robo-advisors are sterile — hands-off. Humans are adaptable and can showcase their skills and expertise by actively listening to clients and showing an in-depth knowledge of their needs.
Trust is demonstrated by understanding clients. Robo-advisors make product and investment recommendations based on algorithms and patterns. Many human advisors leverage the same technological resources, but they add a layer of human emotion and understanding to deliver personalized recommendations. Advisors can also adjust their offerings to meet client needs, such as adding tax or retirement planning tailored to each client’s circumstances.
A study from Vanguard found that 88% of clients using a robo-advisor say they would be willing to switch to a human advisor. Conversely, only 4% of clients using a human advisor said they would switch to a robo-advisor. The lesson? Clients connect with human advisors, especially those who prioritize human connection and things like understanding their goals and active listening.
Teach and Work Through Complex Problems
Financial advisors do more than just manage investments. They also educate clients, help plan their futures, and coach them through major life stages. One of the top things clients look for in an advisor is skills and expertise to help them understand complex financial situations.
Robo-advisors may be able to link to relevant articles, but they can’t teach like humans can. This is especially true for complex financial issues or questions. Advisors can provide context and personalized answers. They can tailor their education approach to each client’s needs.
Successful human advisors empower clients by answering their questions and explaining financial issues. They help simplify complex topics and demystify challenges that may seem overwhelming. By leaning into the educational side of advising and being a valuable resource for clients, advisors can stand out from robo-advisors.
Integrate Human Touch and Tech Efficiencies
In today’s technology-driven world, the decision between robo-advisors and human advisors isn’t black and white. Most clients don’t want to rely completely on technology to reach their financial goals, but they also don’t want to rely totally on humans. The best solution: finding a balance between the human touch and the efficiencies of technology.
The wealth management experience for clients is often full of filling out repetitive forms, waiting to have questions answered, and not having an updated or accurate view of your investments. Integrations solve many of those issues and free up advisors’ time to answer questions and provide personalized financial advice. Integrations, such as combining forms, utilizing digital signature services, and pulling data from multiple sources into financial planning software, enhance the client experience and provide the convenience of a robo-advisor with the personal touches of a human advisor. Human advisors who can prioritize their human characteristics while creating streamlined technology workflows can gain a strong competitive advantage.
Docupace is a leader in cloud-based technology and digital storage for financial advisors. With dozens of integrations with leading platforms, Docupace makes it easy to open new accounts and spend more time with clients, delivering the real human connection they crave. Click here to learn more and schedule a discovery call.
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