Computer programs that accept information about consumers and provide financial advice are becoming increasingly sophisticated. These “robo-advisors” might seem like a threat to traditional financial professionals, and it’s true that some portion of business will probably shift to these automated systems.
In response, today’s financial professionals will need to adjust the way they work with clients and reconsider what potential benefits they can provide for consumers. Robo-advisors will be useful for certain tasks, but they can’t replace traditional producers entirely.
What robo-advisors are good at
Ideally, financial professionals should identify what robo-adivsors offer and find ways they can compliment or exceed that service. In their current state, robo-advisors are great at simple tasks, but they fall down when things get complicated. That’s because they don’t have the wealth of experience, knowledge and wisdom necessary to properly address the complex needs of high net worth individuals or other people with unique asset situations.
Robo-advisors are good, however, at helping younger clients who do not have a lot of assets and want to take a hands-off approach. Millennials have embraced technology and are willing to entrust their savings to an automated system, according to CNBC. Financial professionals may want to accept that these consumers are not ready for the assistance producers can provide, and should wait for them to build up more wealth.
High net worth individuals and older people who are nearing retirement will have more complicated financial issues to deal with. These consumers will benefit from the insight a human financial professional can provide, and producers should specifically target this demographic. According to LifeHealthPro, robo-advisors have difficulty with more subjective issues, such as guaging potential health care costs and helping clients prepare.
Discussions about retirement savings require an understanding of a client’s health and the current economic climate for health care. Additionally, a person near retirement age has built up savings over a lifetime. These savings strategies may be complicated, and sorting through a person’s retirement goals and his or her current financial situation will probably require an open and honest discussion between producer and client.
The increase in robo-advisors is not a death sentence for financial professionals. Instead, it offers producers an opportunity to focus their efforts on specific clients who need their help most. More people will be able to get financial guidance thanks to robo-advisors and many of these people will eventually turn to traditional financial professionals.