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New competition in the form of digital or “robo-advisors” has many industry leaders and advisors concerned.
For the most part, machines are currently just digital money managers or TAMPs. As the machines get better and better at increasing their capability, and as user interfaces become friendlier, it’s possible that machines will be able to do sophisticated financial planning and give advice without a human interface.
Naïve advisors discount the machine as a legitimate competitor.
Machines are as dumb right now as they are ever going to be. Their capability is increasing exponentially, not linearly. How many humans do you know who are twice as smart, twice as fast, or twice as effective as they were a year ago? Competition from technology will continue to get stronger, faster. Those advisors who try to hang on to skills that machines can do better will likely not survive. Technology is much better at the “hard skills” of crunching numbers, aggregating data, automating follow-up, portfolio construction and management, creating reports, etc. The smart human advisors will not compete with the machines.
Smart advisors recognize that highly intelligent, fast machines can help them deliver on their client value promise while reducing expenses.
Smart advisors do what the machines can’t do: the “soft,” or “people skills.” Ask great questions, listen with empathy, make an emotional connection, build high-trust client relationships , counsel individuals and couples to establish goals that are crystal clear and well-defined, tease out their core values and other emotional drivers, inspire people to take the action required to achieve their most important goals and fulfill their most deeply held values, coach clients to stick to the plan during uncertain economic times, and hold clients accountable to do what needs to be done… especially when it’s not comfortable and they don’t feel like it.
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No matter how good the machines get, a caring human with great people skills and powerful machines with incredible technical skills will be the winning combination. The machine can be programmed to do the technical work, but it’s unlikely the machine will ever genuinely care whether the human clients get out of debt, accumulate adequate emergency reserves, own the right amount of all types of insurance to protect against the inherent risks of life, save and invest enough to achieve their goals, reduce their taxes, and complete their legal docs and estate planning.
There is a big difference between being programmed to emulate compassion and actually being compassionate. The losers will be the technician advisors who try to compete with the machines on their turf instead of further developing a competitive advantage with their people skills.