The Invasion of the Robo Advisor

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They are coming to take your job… or are they?

This summer’s blockbuster end-of-the-world movie promises to blow the lid off the financial advisory industry. Robo advisors are here and they threaten to suck the blood out of the industry. The press is already sounding the alarm with a drumbeat of coverage from Wealthfront, Betterment, FutureAdvisor and any and every other foreign life-forms now tele-transporting themselves into our orbit. They spell doom and destruction for all of us and promise to sop up trillions of investment dollars now managed by living, breathing earthbound advisors.

Their prey? Millennials. The technically sophisticated children of the baby-boomers who have watched their parents suffer at the hands of the financial services industry through repeated boom and bust. Their skepticism extends to everything except the internet, making them fair game for robo advisors, and their venture capital backers. If they have their way, they will ruin everything. No more will business get done over a round of golf and certainly the opportunity to separate investors from their money over a free steak dinner seminar will also disappear. And worst of all, we might say goodbye to the 1% fee earned for doing nothing more than making an annual client telephone call and sending automated quarterly reports.

But haven’t we heard this all before in a galaxy long ago and far away? If I am not mistaken, it was during the tech bubble of the late 1990s and early 2000s, when Dow 30,000 was the rallying cry and a monkey with a dart board could make money investing in sock puppets or grocery store delivery businesses or Mark Cuban’s It was all supposed to spell the end of financial advisors, stock brokers, the insurance industry and anyone else whose jobs were at risk due to new online financial platforms or internet-based day trading technologies.

Well, guess what happened on our last trip to the end of the world? The market crashed. Wealth was destroyed. The masses who thought they had it all figured out were forced to reconsider. They ran for the hills, seeking help and advice, in a desperate attempt to protect and preserve.

And while today online platforms exist all around us, the Financial Advisory industry has grown an astounding 140% since 2000, employing more than 225,000 advisors nationwide and being called one of the best career choices for the graduating class of 2014.

And so we find ourselves now faced with a similar threat. This time from companies like Wealthfront, which in two and a half years reached more than $1 billion AUM by catering to smart, young professionals. They seem to love Wealthfront’s automated advisory platform, and its futuristic home page, self-test that after a few quick questions can identify anyone’s perfect investment portfolio. Never mind that everyone’s web site does that. And what about its brand new investment feature for 20-somethings to manage the stock options given to them by their employer? After all, we all work for Google, right?

It all sounds marvelous and it is, as long as the stock market continues to boom. I mean who needs a marriage counselor on their honeymoon? When times are good, we all have it figured out. We all know the answers. We all can do it ourselves. Just like that day trader in 2001.

So today, the empire strikes back. Here is the plan of attack:

  1. Build authentic relationships with your clients. Get out in the field. Find out about your client’s goals and aspirations. Address their fears. Provide them hope. Win the trust that a computer can’t.
  2. Meet the family. My son is precisely the kind of guy my financial advisor should know. He’s all MBA’ed up. Working for a high tech company. Misspending some and wondering what to do with the rest. Yet, there’s no relationship. No connection. Millennials will inherit $59 trillion dollars over the next half century. Please get to know some.
  3. Use social media. Yes, social media. I went home last night to find my wife reading, “Stop Acting Rich,” by Thomas Stanley, the guy who wrote the Millionaire Next Door. She learned about the book from a Facebook friend, downloaded it to her Kindle from Amazon, and is now reconstructing our financial lifestyle because of it. The lesson? If you aren’t connected digitally to your clients, another advisor may well be, and he’s angling to win their confidence, just like Facebook convinced my wife to act.
  4. Get personal. FutureAdvisor brags that with your monthly payment, you receive telephone support from one of their financial advisors. Great. I am looking forward to sharing my financial details with you—a voice on the other end of the line, a stranger for all intents and purposes. The irony is that we live in a customer-is-king world, where personal service is the ultimate differentiator. Yet robo advisors are suggesting that cold, indifference is somehow beneficial to investors. It’s not.
  5. Build your credibility. Ok. I am in PR so you might expect me to pitch it somewhere in this post. Truth is, sustained, high impact media coverage holds great value in building credibility. In our world, the media, more than any other measure, confers the kind of plausible believability advisors need to separate themselves from the field. I know it and see it work to great effect every day. Awareness stands as the ultimate weapon to beating back the Invasion of the Robo Advisors, this summer’s biggest blockbuster release, which is likely to be the dog of the year.