Understanding where robo-advice can complement and enhance relationships will be key for most full-service wealth management firms.

Artificial intelligence (AI) is changing the way we do business. With robo-advice becoming more prevalent, the human interaction between adviser and client is increasingly important. Jake Smith reports.

Robo-advice is a relatively new term, but it has been in development for some time. The concept of robo-advice is simple. It incorporates the use of digital practices and automation to build and manage portfolios and other instruments for investors.  The advances in robo-advice have been commanding significant attention in the fintech and wealth management landscapes, sparking conversation around the relevance of face-to-face relationships between clients and advisers.

The Robo Revolution

In some instances, robo-advice presents itself in the form of an educational resource by informing consumers on what, how much and where their money is being spent. Other forms of robo-advice can propose the clients most appropriate asset allocation. Robo-advice can even determine the level of insurance cover you should have and help you submit applications as well as execute trades on the stock exchange.

According to PwC global wealth management leader, Michael Spellacy, it is these factors that are a threat for traditional advisers.

“The traditional financial adviser model is under assault,” Spellacy says.

Spellacy believes the advent of robo-advice is a real game changer for the industry.

“The financial adviser has to ask themselves the question: ‘What is my differentiation to my customer? How will I be a better financial adviser to my customer?'” Spellacy says.

People Power

Whilst robo-advice may have its appeals, there are clearly areas where a financial adviser has an advantage. Investment management is just one part of a client-adviser relationship. Estate planning, refinancing a mortgage, creating a financial plan, are just some of the myriad ways a financial adviser can assist. Investment management is just one component. Reassuring clients through difficult markets, persuading clients to take action and constructively devising different solutions will always remain at the core of the financial adviser model.

Interpersonal dealings, complicated situations and raw emotions can only be gauged in the flesh as opposed to through a screen.

Recent research by Accenture indicated that “77% of wealth management clients trust their financial advisers”. And this is a clear advantage for financial advisers.

Keeping connected

Personal connections will remain critical for many investors. It is therefore essential to develop a unified client-adviser experience that seamlessly brings together the best of human and robo-advice capabilities. Understanding where robo-advice can complement and enhance relationships will be key for most full-service wealth management firms.

Innovation, new technology and competition will dramatically increase robo-advice capabilities which will permanently change the way advice is delivered. Collaboration is the key for financial advisers and robo-advice firms to strengthen the advice and investment environment.