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  • Heather Luea

    Round 1 (Ding, Ding!)

    By Heather Luea, Academic Department Chair 
    Published December 2013

    One of the hats wealth managers wear is that of a financial planner. Financial planning specifically focuses on the client side of investing. Planners traditionally meet with clients, educate clients about investment opportunities, and work through a complete, financial plan that includes but is not limited to retirement planning. Traditionally, clients worked directly with a planner in face-to-face meetings that required detailed discussions about the client’s life. The better a planner knows the client, the better the planner can tailor a plan that matches the client’s goals and risk tolerances. Technology is changing the way financial planning is being done. “Robo-advisors” are becoming widely available to clients and are changing the landscape of the industry. Face-to-face meetings are no longer required as investors can now get financial “advice” online and on the cheap!

    Other industries have seen the same transformation, although with less optimistic results. For example, travel agents have become virtually extinct as large, discount websites have allowed the everyday consumer to book extensive vacations in a matter of minutes. In the banking industry, many of the tasks performed routinely by bank tellers are now being done through ATMs. There are a host of other examples, and the financial planning industry is no exception. As “robo-advisors” begin to encroach on our territory, there are several considerations for clients seeking advice and professionals in this field.

    • Client and Professional Consideration: Low fees are charged on these online financial planning websites. This saves the client a few extra bucks and puts pressure on financial planners to offer lower fees or a tiered system based on income or asset value.
    • Client Consideration: The financial plan will not be as customized as those obtained through meetings with a financial planner. Every investor has a unique situation, with different goals and different means of working toward those goals. To obtain a plan that really works for a client, they should choose a living, breathing advisor.
    • Professional Consideration: This change provides an opportunity to really distinguish ourselves as a “superior product,” especially for clients who have little knowledge of investments or are not tech savvy. This encroachment also emphasizes the need for creating unique plans and having conversations with the client that they can’t have with a “robo-advisor.” What are the client’s life goals? How can these goals be achieved most efficiently? Financial planning is about much more than choosing the right portfolio mix.

    It is unlikely that “robo-advisors” will eliminate the need for financial planners. In fact, financial planning continues to be one of the high-growth careers. This is an opportunity for financial planners to distinguish their skills and emphasize the benefits of working with living, breathing advisors. After all, when I want to do more than just get cash, I see a teller and avoid the ATMs.

    References:

    Lee, Raef, Advisor Perspectives, Five Ways Robo-advisors Will Change the Way Advisors Work, Online at http://www.advisorperspectives.com/newsletters13/Five_Ways_Robo-advisors_Will_Change_the_Way_Advisors_Work.php, October 15, 2013.

    Coombes, Andrea, The Wall Street Journal, How to Get Investment Advice for Less Online, Online at http://online.wsj.com/news/articles/SB10001424127887323477604578654101591319918, September 4, 2013. 

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