by Tony Vidler
There’s 2 key problems for the robo-advisers: they generally don’t advise, and nor have they evolved enough to substitute for human-to-human communication.
Artificial Intelligence may well change all that, but for now it is bad news for robo-advisers as the human consumers still overwhelmingly prefer to communicate with humans in fairly traditional ways according to the Salesforce 2016 Investor Report Findings
I have no doubt that many of what we refer to as robo-advisers deliver useful and desirable outcomes for many consumers. But giving advice isn’t really amongst them as yet. They can deliver information, and can use lots of superb algorithms to wade through probabilities and statistics to determine likely solutions to predictable problems, and they can transact quickly, cheaply and in unimaginable volumes.
Consumers increasingly see the benefit for themselves from these functions, and robo-adviser platforms as we know them today will continue to get good volumes of business I suspect.
But when it comes to getting advice there still appears to be no ready substitute for 1-to-1 human interaction. Increasingly it seems consumers and their advisers are using technology to eliminate inefficiency such as time spent travelling to meetings or exorbitant inner-city parking and office costs, but the primary method for clients making decisions involves consulting with their human adviser. That human consultation may well be shifting increasingly to chat or video conferencing, or texting or teleconferences however the human interaction in the advice process remains robust.
In the face of the many technology-based challengers looking to usurp the role of the adviser it would seem to be a good defensive play for advisers to invest in MORE actual human-to-human contact.
The clients clearly value it, and it does separate the advice businesses from the machines. That is pretty good news for the human advisers who fret about platforms replacing them.
Beat the robo-advisers by being you. Talk more to the people who already like and value you. The robo-advisers may well win the majority of battles in the transactional space as they race to price each other out of the market through ever-decreasing margins, but they are not going to win the relationship management war.
My bet for the winner of that one is the human advisers.