Friends or Foes?

Robo-advice for the advisor

It would be safe to say most individuals perceive a growing competition between robo-advisors and traditional wealth managers. Even further, if an individual works on one side or the other he/she would most likely portray this space as an “us vs. them” or “them vs. us” environment. However, there is a very important aspect of the robo-advice movement that most people either overlook or are simply unaware of, the “robo-advisor for the advisor”.

This concept involves taking the same technology that is provided to clients through a fully automated investment platform, but putting it in the hands of the advisor instead. In the simplest terms, it allows wealth managers to improve operational efficiency in order to spend more time on developing and maintaining personal relationships, an extremely vital part of any wealth manager’s business.  

In a recent blog, we shared our belief that the preferred model of wealth management moving forward will be the hybrid approach. So, why is the development of the “robo-advisor for the advisor” so important?  Because this technology enhances the hybrid approach even further by providing wealth managers the opportunity to improve the user experience of this approach. Offering the client the opportunity to interact with a robo-advisory platform while also having accessibility to a human advisor is plenty helpful; however obstacles may arise throughout the everyday implementation, as the client operates with new-age technology while the advisor operates with more traditional technology. The “robo-advisor for the advisor” allows the advisor to operate seamlessly on the same platform as the client, with mundane tasks completed automatically. As the client experiences automated account setup and portfolio rebalancing, the advisor experiences automated paperwork and billing, leaving both parties more time to focus on those conversations that we believe still benefit from human interaction, such as saving for college, estate planning, and setting long-term wealth goals.

One of the leading robo-advisors, Betterment, seems to agree with the idea that this approach will become very popular, as they released Betterment Institutional in October 2014 (available to registered investment advisers).  In its short existence, this “advisor-branded” technology has been described by Business Insider as “bridging the gap between advisers and the new generation of online investment platforms”[1] and CNBC has stated that it will “help advisors by eliminating or combining many traditionally cumbersome tasks”[2]. Not only does the press love it, but the immediate results are also impressive: Betterment has not released AUM separately under its B2C and B2B streams, however, the entire firm had $900 billion in AUM when Betterment Institutional was created and one year later (Nov. 2015) it had over $3 billion in AUM[3]. This newfound growth seems to be a strong indicator that both businesses and clients prefer the newly integrated hybrid approach.

The hybrid solution sounds like a win-win, but this technology isn’t just going to fall into the hands of top wealth executives at the incumbent firms. These firms will most likely need to either partner up with a third-party platform or create an original platform for their advisors; but whichever option they choose, they would benefit from figuring out how to get involved in the “robo-advisor for the advisor” movement in the near future. A portion of the millennial generation may lean towards the fully automated solution right now, as many members of this generation don’t have enough net worth to want to pay for traditional advice; however, as wealth is transferred over from the Boomers, the millennials will most likely gravitate towards wealth managers who can provide the best robo-advice technology operating in tandem with the best human advice. We believe robo-advice will have a prominent place in the future of wealth management, but not necessarily as a bitter rival to traditional wealth management, as most people view robo-advice today.







About the Authors

kapin vora

As Partner for the North American Wealth Management practice at Capco, Kapin is responsible for the market offerings with a keen focus on the development of digital initiatives that will enhance the capabilities of today’s progressive Wealth Managers.

A recognized thought-leader and expert in the Wealth Management sector, Kapin has obtained over 15 years’ experience while delivering large-scale, transformation initiatives for a variety of institutions. Whether working with boutique Wealth Managers, leading Investment Banks or Asset Management firms, he has led the implementation of clearing transformations and the adoption of digital innovations. With a particular expertise in operational strategy and planning, Kapin has been instrumental in helping these organizations successfully review and address their technology and outsourcing requirements.

tobias henry

tobias henry

Toby is a Managing Principal in the Wealth Management practice of Capco, where his area of expertise lies within digital and mobile transformations to improve customer experience and boost profitability. From his induction to the Financial Services world at HSBC, Toby has amassed a varied project portfolio covering proposition development, online trading platform design and delivery, in addition to business analysis for the Cards (Debit and Credit) and Mortgage products. He also holds ISEB Certifications in Modelling Business processes, Requirements Engineering, IT enabled business change and Business analysis essentials.


The content and opinions posted on this blog and any corresponding comments are the personal opinions of the original authors, not those of Capco.