Written by: Justine Melman
A hybrid approach where human context complements robo-advisory is where investment firms need to move next.
Investing in stocks and bonds can be a daunting proposition, especially for Millennials. In fact,
61 percent of people surveyed by Ally Invest claim they’re intimidated by the stock market — Millennials more so than Baby Boomers and Gen Xers — and
30 percent of Millennials polled by Blockchain Capital say they’d rather invest in cryptocurrency than traditional stocks and bonds.Of those that do invest, only 46 percent use a financial adviser, according to a
LendEDU survey. This leaves a large opportunity for robo-advisors, which Business Insider predicts will manage around
$1 trillion by 2020.But the market is saturated with competition, and it seems like new investment options are popping up every day. For example, apps like Acorns and Stash approach the situation from a different perspective by allowing small investments of spare change. Standing out in this market seems to be getting more and more difficult, which is why a purely technological or manual solution is no longer tenable for investors.A hybrid approach where human context complements robo-advisory is where investment firms need to move next. Some robo-advisors, in their current form, possess designs and ergonomics that are best described as static and boring. They don't learn from customer behavior, choosing instead to rely on a model that allows users to set up and forget about their portfolios without enticing them to establish healthier financial habits.
Advisorsthat can truly build a data ecology to predict their user needs — and not just predict the market — will have the opportunity to completely disrupt this market. These platforms can serve as educational resources that show users how to transfer funds between liquid and investment instruments and guide them through major life events, such as college graduation, buying a first home, or inheritance planning.No robo-advisor is doing such things on an intuitive, scalable basis, which is why
platforms that use technologyto complement human input have an opportunity to distinguish themselves from competitors and disrupt the market.Related:
Millennials Finding the Path Forward to Financial Freedom Rise of the Cyborgs
Most high net worth investors prefer human advice over automation. These are the customers that firms cherish most and the ones whose attention they are trying to draw. While many lamented that robo-advisors would inevitably automate investment planning and replace human financial advisors, that’s simply not the case.Instead, these automation tools are helping human advisors become powerful investment solutions for clients. Hybrid firms like
TD Ameritrade and
BlackRock, for instance, provide the highest customer satisfaction at the lowest costs.A recent
Accenture survey found 64 percent of hybrid users actively seek and receive assistance with their financial planning. This engagement rate is much higher than the 44 percent who rely entirely on either digital or human advisors, proof that an approach that combines human and robotic touchpoints for investors has real viability.
Striking a Balance Between the Real and the Robotic
Client trust is the most important metric for investment firms, especially in today’s volatile market. While robo-advisors excel at gathering data,
savvy financial advisorsneed to be at the helm. And considering how ubiquitous money is in our everyday lives, that data should be coming from every direction.Everything from customers’ hobbies to their social circles, favorite foods, and even health routines are factors in providing investment advice. A cross-platform approach that combines contextual data, public data, and proprietary analysis is key, and if your firm isn’t already investing in this type of technology, you're behind the curve.Morgan Stanley, for example, has a robo-advisory service that starts with a simple survey. It gauges clients’ interests in everything from emerging trends to social issues and identifies opportunities that fit all of their goals. And it’s not a one-and-done deal — the platform continues to monitor investment allocations to suggest portfolio improvements.While a smaller firm may not have the resources to build this in-house, there are
plenty of technology partners available. The key is to make investing accessible using both technology and human interaction. This hybrid approach is the future of robo-advisement.
