RK: To what extent can robo-advice be used by financial planning/wealth management firms?
ML: I think the robo-technology that has been built will work incredibly well but for a different business model – I see it helping financial planning firms serve their clients.
To serve clients better and more efficiently for the business (given the pressures on margins and from client expectations as mentioned already) firms need to operate a hybrid model. The hybrid model is not only in the form of human-managed portfolios versus robo-managed portfolios. It is also hybrid in terms of interaction of communication that allows an adviser to see the client face-to-face less frequently but keeps the service equally high.
It’s the enhancement of the person that is going to add value not the removal of the person.
If an advice firm owner is asking how they can benefit concretely from technology advancements, some of the simple wins are in the onboarding of new clients. There are key elements that can be automated, for example the gathering of information, the know-your-client (KYC) aspects, where the client fills in a fact find via a portal or editable PDF etc., and thereafter the pre-population of systems with that information. It is far more efficient than for a member of staff to be inputting data. Similarly with digital signatures and KYC on an annual basis.
Other examples are using a portfolio management system that automatically re-balances investments and dis-investments etc., and having portal video and live chat, which are functionalities we offer.
Another trend I am seeing is financial planning firms looking to where their future clients will come from. People are looking at how they use technology to gather new clients, broadening their client banks by using technology to serve clients who are building their wealth but don’t need a full advice service, saving the human interaction for when it is really needed.
For the same reason I am seeing firms moving back into employee benefits side of the business, employing technology to facilitate high volumes of low amounts and building long-term relationships.
Using technology is a way of bringing in people, building a relationship and getting them to believe in your ethos because of the way you’ve communicated with them. Even at the earliest stages people start to buy in to the feel of firm and if you can bring people on a journey with you that is really powerful.