Technology
GUEST ARTICLE: Robos Aren't Necessarily Going To Take Private Bankers' Jobs
While some may view "robo-advisors" as a cost-saving business model and fear the traditional private banking model is doomed, this article argues the human element will remain vital.
A prominent figure in the world of social media and digital innovation takes a look at the phenomenon of the "robo-advisor" and automation in wealth management and financial services. The author is Clara Shih, CEO and founder of Hearsay, which provides predictive analytics technology. The editors of this news service are pleased to share these insights with readers and we invite them to respond. Some of the examples in this article come from the UK but given the borderless nature of technology the insights should be useful to readers in all regions.
This last decade has been characterised not merely by the immense
changes due to disruptive technology, but also the speed at which
these changes have taken place. From Uber and factory automation
to rocket launches into space, traditional firms and industries
are being totally upended.
Certainly the financial advice industry is in no way immune to
these seismic shifts.
Whether it is the Luddite revolts of the early 19th century in
the UK or the recent anti-Uber protests by London cab drivers
(and those in other countries), history tells us that
technological advance is not always readily accepted (nor good
for job security). So it is perhaps understandable that some
advisors are fearful that their roles will be replaced by bots,
artificial intelligence, and algorithms – or at least that the
traditional fees they enjoyed will become eroded over time.
Given the complex and emotional nature of financial planning and
advice, all signs point to a continued important role for human
advisors to play. I do not believe they will go the way of the
travel agent circa 2000. The future of the industry is much more
likely to be defined by how man and machine work together, rather
than how they compete. But how human advisors work and spend
their time will change dramatically.
Technology as friend, not foe
Indeed, it is only through leveraging technology that service
providers will be able to focus on what human workers are
uniquely capable of doing: providing excellent, high-touch client
service at scale. It is hard to envisage how a machine could
foster such trust, coach clients through gut-wrenching market
changes, and cultivate meaningful relationships.
Rather than wringing our hands about robots taking over the
world, smart organisations will embrace strategic automation use
cases to aid advisor decision-making. Technology will be
leveraged to help advisors become much more data-driven in how
they spend their time, improving their ability to focus efforts
on the highest-value activities, such as which client to engage
with and what to say.
Advisors will be empowered to work smarter, not just harder and
longer hours. The sheer volume of data held by any one firm is
already huge, and it is growing. But because this data is usually
siloed and largely unstructured, it can be hard to identify and
unlock the vital intelligence that is buried within it. It is
only through technologies such as predictive analytics and
machine learning that these growing volumes of data can be
converted into meaningful insights and suggested next best
actions, which can then be used to shape advisor-client
conversations and relationships.
Automated processes also play an important role in maintaining
compliance with mounting legislation facing the industry.
Automation means fewer mistakes and reduced risk of
non-compliance, which is good for firms, advisors, and clients
alike.
The rise of robos
The rise of robo-advice websites - catering primarily to
tech-savvy, time-poor millennials - is already redefining the way
advisors and clients interact. Earlier this year, the Financial
Advice Market Review (FAMR) released a report on the growth of
this market and – while it recognised that the UK robo-advice
market was still relatively small, covering less than £1
billion ($1.26 billion) assets - you only had to look across
the Atlantic to see its true potential. In 2014, the largest US
robo-advice firm alone was handling assets valued at more than 13
times the entire UK market.
But even though the market statistics point to the fact clients
are increasingly turning to automated online advice, the vast
majority of them would still prefer to speak with a human. The
challenge here is that many human advisors are difficult to
access, especially for younger clients who spend most of their
time online and are less inclined to pick up the phone or book a
face-to-face meeting.
To address this challenge, firms need to overhaul and modernise
how their advisors prospect, deepen, and grow client
relationships through social media, mobile-optimised websites,
email and SMS. If they utilise these digital channels,
advisors will find it easier to reach and nurture their clients,
and will be afforded a greater opportunity to provide thoughtful
and relevant advice when the client needs it most; for example,
to coincide with the birth of a child or a career change.
Finally, advisors should feel assured that automation is best
suited to predictable environments. Whereas humans have the
ability to personally reassure and advise clients during sudden
market downturns, the jury is still out on how well robo-advisors
respond during these situations, as evidenced by US robo-advice
firm Betterment's algorithms halting trades during the Brexit
vote.
In these most volatile of times, it is unlikely that a machine
could replace the work done by a human advisor, but it could most
certainly enhance it. Algorithm-aided humans are the future of
financial advice, not unlike how spreadsheets became a staple of
the banking and accounting profession starting in the 1980s.
About the author
Clara Shih is CEO and founder of Hearsay, provider of the
Hearsay 360 client engagement solution for financial services.
Shih developed the first social business application in 2007 and
subsequently authored the New York Times-featured best-seller,
The Facebook Era. Her latest book, The Social Business
Imperative: Adapting Your Business Model to the Always-Connected
Customer, was released in April 2016. She has been named one of
Fortune’s “Most Powerful Women Entrepreneurs”, Fast Company’s
“Most Influential People in Technology”, BusinessWeek’s “Top
Young Entrepreneurs”, and a “Young Global Leader” by the World
Economic Forum. She also has been listed in both Fortune’s and Ad
Age’s “40 Under 40" as well as InvestmentNews’ “40 Under 40” and
ThinkAdvisor's IA 35 for 35 “5 to Watch". Shih is a member of the
Starbucks board of directors and previously served in a variety
of technical, product, and marketing roles at Google, Microsoft,
and Salesforce.com.