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Meet Your Financial Advisor, The Cyborg

Meet Your Financial Advisor, The Cyborg

When Charles Schwab Corp (SCHW.N) customers call in, there is one thing they consistently seek: Help.

That is according to Neesha Hathi, who heads client experience and digital platforms for individual investors at Schwab. Client questions, she said, include: "Help me understand the markets; Help me understand what the political environment is going to do; Help me understand how to be diversified; Help me understand how this portfolio will help me against my own personal goals."

Those calls for help explain why Schwab, like many traditional financial firms, has embraced digital offerings while still maintaining a large staff of human financial consultants. The robots - at least so far - cannot answer calls from panicked clients about central bank policy, interest rates or geopolitics.

At the Reuters Global Wealth Summit in New York this week, executives from several other firms, including Morgan Stanley (MS.N), Bank of New York Mellon Corp (BK.N), LPL Financial Holdings Inc (LPLA.O) and Northern Trust Corp (NTRS.O), offered similar views that the future of financial technology will follow a so-called "cyborg" hybrid model of human and machine interaction.

The firms spoke at a time when many in the industry are watching the rise of robo-adviser companies like Betterment LLC and Wealthfront Inc, which rely heavily on automated investment tools. Speaking at the summit on Tuesday, Betterment Chief Executive Jon Stein set a goal of hitting $1 trillion in assets under management, from $4.8 billion currently.

Meanwhile, the larger companies are spending heavily on new digital platforms and making or considering acquisitions to ensure they are at the cutting edge of wealth management.

All are looking to gain millennial customers, keep older clients as they grow more comfortable with mobile devices and reduce costs. Machines can also help them reach customers without enough wealth to justify expensive advice.

Katie Nixon, chief investment officer for Northern Trust Wealth Management, said the firm has found a good reception among clients for a new app that lets advisers show them the pros and cons of investment decisions and allows clients to script out their own scenarios.

"It's nice to be able to see the trade-offs. That's something that the industry hasn't been particularly good at illuminating for clients," she said.

But with all the advances, it is clear that machines still have their limits. Even the wealthiest technology entrepreneurs often are not ready to trust their investments entirely to a machine, said Don Heberle, head of wealth management for BNY Mellon.

Clients of Atherton Lane, an independent adviser it recently bought in Silicon Valley, still want to talk to a live person at times. "In all cases we still have personal interaction," he said.

Another issue: machines cannot tend to investor emotions in a crisis, said Mark Casady, chief executive of LPL Financial, (LPLA.O) which struck a deal to use robo-adviser technology from leading asset firm BlackRock Inc (BLK.N).

"We all know the truisms that are common sense, but most consumers don’t follow them," Casady said. Human advisers help clients apply those rules during what Casady calls "low-conviction" moments.

"People need people," he said.

 

(Reporting by Ross Kerber; Editing by Lauren Tara LaCapra and Dan Grebler)

TAGS: Technology
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