As the keynote presenter of last week’s Financial Planning Association of New Jersey (FPANJ) annual conference, Bob Veres, publisher of Inside Information, cynically called his session “Terminator 4.” The title was in reference to four past examples of what he called “non-life threatening” events to the financial planning community in which the advisors initially overreacted, and then over time responded in a way that raised the level of the professional.
Veres explained how personal finance magazines made advice more accessible to consumers which gave way to ongoing planning and birth of the AUM business model.
He also cited how the advent of discount brokers gave way to modern portfolio theory portfolios, disciplined rebalancing, tax-loss harvesting, and the buy-and-hold ethos.
With the current robo-advisor threat, Veres suggests that robos have commoditized some of the most labor-intensive, least creative activities in the advisor’s office--which is actually doing advisors a favor.
So how does Veres see the industry reacting to this latest threat, or possible opportunity? He provided the following three responses:
- Time spent in front of your clients is your key differentiator.
- To get that time, you need to offload many of the same things that the robo-advisors are offering to do for consumers.
- While you’re at it, offload a lot of other rote chores that you may be doing around the office.
He further explained how the institutional versions of the robos can be used to open up referral networks and how successors can use them to bring in younger accumulators to the advisor's "'portfolio' of clients."
Veres also believes there’s an opportunity for advisors to leverage “the best of the robo” to redeploy a better initial client experience. He explained, “Currently, the first client meeting is like a root canal; filling out forms, answering highly personal questions with a stranger, weeks later a plan appears--with no control over the recommendations or process.” He predicts a future where advisors can make the experience much more interactive--and even fun--as information gathering is now much easier to access and, with the use of a big screen monitor, the advisor and client can work together to define, refine and develop a more effective financial plan--in real-time.
Veres closed the presentation with what he called “The Eternal Lesson.” There will continue to be future challenges… the moral of the story is complacency should not and will not be tolerated. The tide is never going to stop rising. You (and your firm) will always need to move to higher ground.