How Financial Advisers can Work With Robo-Advisers - TheStreet

How Financial Advisers can Partner With Robo-Advisers

Technology can be a bridge to the future for advisory firms looking to connect their boomer clients and the next generation.
Publish date:

While the term robo-adviser conjures up an image of a tech platform geared directly toward investors, traditional financial advisers are increasingly incorporating robo technology into their practices as well. This is in large part due to the demand by many clients for a combination of human and online advice.

Many younger investors are very comfortable with working online with service providers of all types. This goes beyond logging onto their accounts online; they are comfortable dealing with a wide range of virtual service providers.

In fact, this generation has grown up online and many expect digital interaction with their financial advisers. This is the generation to which Cerulli Associates estimates $68 trillion will be transferred by some 45 million households over the next 25 years. If financial advisers want to retain this wealth by working with the beneficiaries of existing clients, or by attracting new clients of this generation, they will need to work with this next generation on its terms.

Rise of the Robo-Adviser

In recent years, robo-advisers such as Betterment and Wealthfront have experienced significant growth as they offer easy access to low-cost investing models often based on ETFs. Many robo-advisers offer several tiers of service that may be based on certain minimum investment levels or other factors.

According to, assets under management by digital advice technologies, including robo-advisers, are projected to reach $1.4 trillion in 2020, an increase of 47% over the past year. By 2023, this figure is expected to jump to $2.5 trillion.

Several robo-advisers offer access to a human adviser as part of their service offering. For example, Betterment offers access to human financial advisers for financial planning advice. Other robo-advisers offering human advice in addition to the algorithm-driven advice include Personal Capital, Wealthsimple and Ellevest. Additionally, major firms like Vanguard and Charles Schwab have started robo-offerings that incorporate some level of adviser interaction as well.

Hybrid Robo-Advice

According to financial services marketing strategist April Rudin, 64% of high-net-worth individuals are counting on their future relationship with their financial adviser to be digital. She also cites how the future of advice is changing, with many financial advisers becoming co-pilots for their next-gen clients.

Certainly the COVID-19 pandemic has accelerated the intersection of financial advice and technology. However, these trends were well underway prior to the pandemic.

Incorporating robo technology into a financial adviser’s practice can offer the best of both worlds for both financial advisers and their clients.

One option for advisers to consider is using robo technology on their sites to deliver financial planning advice digitally. Often this is a service that many advisers offer for free as part of their wealth management services that may be primarily focused on higher-net-worth clients.

Offering an online, largely automated financial planning platform can allow financial advisers to charge separately for this service. The heavy lifting is done by the robo-based planning software. This type of arrangement can also be an ideal way to work with younger clients. One way that this model might work is through a monthly subscription fee for planning services and the ability to deal with an adviser virtually.

Research by the Alte Group showed that 82% of older millennials and 73% of Gen Xers would look favorably at this type of arrangement.

Beyond this, robo technologies might be a good way for clients to input their data on the front end and have initial asset allocation and financial planning recommendations made available to them. At this point, the client and the adviser can interact online as well, perhaps via a Zoom meeting or similar arrangement.

By doing this type of hybrid advice arrangement, it allows the client and adviser to build a relationship, allows clients who prefer a tech-based relationship to work in a way that’s comfortable for them and offers an inroad for the adviser to build a relationship with younger clients that certainly might evolve into something bigger over time as these clients build assets.

There are several fintech firms that can offer this type of technology for a financial adviser to incorporate this type of advice arrangement into their practice. In addition, Betterment has made significant inroads with the Betterment for Advisers product. This is used by many advisory firms in a white label version that fully discloses the relationship with Betterment.

Robo technology can be a bridge to the future for traditional advisory firms looking to bridge the gap between their aging boomer clients and the next-gen clients who stand to inherit wealth from these boomers. Finding the right mix of tech and advice that they are comfortable is key in moving forward.