Advisors. Don’t Fret About RoboAdvice!

Consider the advent of The Robo-Advisor. Just how worried should human financial advisors be? Well, based on Credo’s most research with thousands of Canadian investors, financial advisors don’t really have too much to worry about. Certainly not if the advisor is doing the kinds of things he or she should be doing. Here’s a little look at a few things we’ve discovered over the last while – since Robo-Advisors have been introduced.

Investors who have chosen to use a Robo-Advisor are about four times more likely to indicate clearly that the “advice” they get is really of questionable value. There is only about a 4% or 5% probability that an investor who is working with a human advisor sees the guidance they are getting as being of questionable value. With Robo-Advice users, however, that statistic jumps way up to 23%.

That is a look at the questionable value end of the spectrum. The other end of the spectrum is the end where investors tell us that the advice they get is worth its weight in gold. Here we find that about 22% of investors who work with human advisors feel that they get really good advice. Only about 17% of investors who work with a robo-advisor feel that the advice they get is great. So, we see that there is a clear premium in the perceived value of advice that comes from a human again. But, it’s worth noting that 17% is nothing to sneeze at! Robo-advisors are delivering highly valued advice to a unique segment of the investor community, to be sure. (In another article, we’ll explain precisely what that segment of investors looks like.)

What are some of the things that distinguish human advisors? Quite obviously, their ability to actually meet a client is a distinguishing factor. Our research with investors shows that advisors should regularly meet with clients in person. They should supplement in-person meetings with a flow of information that fits for each client. We’ve found that investors who occasionally have online meetings with their advisors are 25% more likely to feel that they get great value from their advisor. Of course, this again depends of the nature of the investor’s expectations. You can’t push information to clients in a digital format if your clients aren’t prepared to consume it in that format.

But, for those who do, here’s an idea for you. It’s not a Credo original… but it is a neat idea. Go out and buy 20 iPad minis. Then start calling your clients and tell them that you’re giving them an iPad so that you can FaceTime with them. Of course, there’s no restriction on what they can do with it… so long as they afford you a 20-minute conversation each month or on an as-needed basis…just to keep abreast of what’s going on with them. That’s providing your client with flexibility and it’s providing you with accessibility.

Where should you meet? Well, you reduce by 50% the likelihood that a client will see your advice as being of questionable quality if you simply give them the option to meet in their location of choice. Yes, it may be very convenient to have your clients come to your office. And for many advisors, it may not be an option to go out into the community and meet at your client’s convenience. In fact, providing your client with the option does not dramatically increase the probability that they will see you as delivering great value… but it does dramatically reduce the likelihood that they will seek an alternative advisor. Offer them this flexibility; they may not take you up on it… but with some things, it’s simply the thought that counts.

At Credo, we’re convinced that there is a place (and a client base) in this world for every good advisor. If you’re and advisor and you’re worried about robo-advisors, then you’re taking your eye off the ball. Remain client-centric – truly focused on understanding your clients and their needs and on delivering those elements of guidance that are of value to those clients. If you continue to do that, CRM2 will come and go – much like Y2K did.