"A man barely alive.”
“We can rebuild him. We have the technology. We can make him better than he was. Better, stronger, faster.”
Steve Austin, Financial Advisor.
Recently there has been much talk of Robo Advisory firms, and the threat they may pose to the incumbents. They typically offer the end-client the opportunity to answer an online questionnaire, and then be placed into a suitable model portfolio - often with some kind of regular rebalancing. During the entire process, you may never need to interact with a human being, and as a result you will be charged very low fees on the portfolio - perhaps in the region of 0.20% per annum. Typically you would also need to move your money to the Robo Advisor - this is certainly the model that was followed by the likes of Wealthfront and Betterment.
This will no doubt appeal to many clients - especially those where this service covers all their needs.
However, it is worth bearing in mind that for a financial advisor, portfolio allocation/recommendation only forms part of the palette of services they offer - and , in addition, the end client has often already chosen his custodian - so is in no mood to move monies again. Many advisors also provide information and knowledge on wealth planning, guidance on tax-loss harvesting, and knowledge or introductions to ancillary services - such as education planning, trusts, mortgages etc. This is in addition to the essential human qualities of empathy, judgement and experience which clients often look to when making important decisions about their lives.
We therefore believe that the future does not lie with a pure Robo Advisory business model, but rather with a solution which seamlessly blends the best of technology with the strengths of what a financial advisor can offer - so more of a Bionic Advisor concept. The human advisor should focus his or her time and energy on the areas where the human aspects are most valued - and those areas which can be made more efficient through automation, should be.
For example, no longer should any advisor spend time creating customized client reporting or proposals in spreadsheets, nor hunt for factsheets - neither should they need to run reports from a system to check on asset movements or mandate breaches. The advisor should also be able to apply such efficiency gains wherever the client may custodize.
Furthermore, we believe that demand for the “Bionic Mix” will not be constant across the various client segments which an Advisory Firm serve - nor will it stay constant over time. We could easily envisage a situation where clients who are just embarking on their investing journey - may be attracted to, and well served by, a robo-type business model. However, as their needs become more complex, as their AuM increases or they become more experienced - they may require more of the non-robo type services, and may also wish to have more of their preferences and wishes reflected in their portfolio. This transition between service models needs to be smooth - so the business model needs to cater for all points on the spectrum from the start.
We therefore feel that a sustainable business model for the Financial Advisory firm therefore needs to be easily able to tailor the level of pure automation amongst the clients - but also within a client portfolio, so that a progressively smaller portion of a client’s portfolio can be managed with a pure robo model.
To hear more about the Privé Managers system, and how we can help transition your business to a Bionic Advisory model, and you into a Six Million Dollar Advisor, please contact us today on email@example.com.
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