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Robo-advisors have changed the way investors get investment advice by providing portfolio creation, rebalancing and basic asset allocation at scale at a low cost. Many potential clients are already used to automated solutions. To attract new clients and gain their trust, financial advisors must articulate what a human planner can provide.
Automations Changed Expectations
Researchers found that 28% of U.S. investors now prefer an automated or robo-advisor investing strategy, with this trend considerably higher among millennials and Gen Z investors. Automated investment tools meet demands for speed, digital access and low fees, fulfilling client expectations. These tools also encourage user convenience and reduce costs.
Interestingly, robo-advisors and humans are not competing for the same clients. Automation and human capabilities lie on opposite ends of the spectrum. The former excels at standard execution, and the latter delivers in the subtle nuances of investing.
The Human Advantages Robo-Advisors Cannot Replicate
Algorithms conduct business at high velocity, following preset rules. Still, they lack the creative intelligence their customers need when financial lives include tax mitigation, business succession, estate planning or complex risks. Human advisors offer real-world experience and systematic consequences for their behavior over time.
Here are some advantages human advisors offer:
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Context: Advisors can account for when a client's income changes, a family takes on responsibilities or how well someone tolerates risk.
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Behavior: In volatile or stressful situations, advisors help clients avoid emotional behavior that algorithms cannot accurately address.
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Continuity: Human relationships build trust and accountability and can adapt to changes in clients’ goals.
How to Demonstrate Your Value
To minimize taxes, sequence retirement income or achieve wealth transfer and legacy goals, a more complex retirement plan and portfolio may be required than a generalized list from a robot. How can you best embrace your role in a digital age of robo-advisors?
Showcasing Expertise Through Strategic Communication
Begin by showing value and establishing the right tone for planning conversations. Instead of focusing on what has happened, explain your decisions, risk management and impact on client goals. Document why you select a strategy, and explore trade-offs and how your decisions align with a client's larger goals.
Automated advisors are ill-equipped to handle some investment topics. Incorporating digital assets should be part of a broader discussion, but clients should be aware that the regulations and impact on digital assets differ depending on their personal situation.
Experts believe several key agencies will finalize definitions and reporting standards for crypto in individual retirement accounts by 2027, increasing human advisors’ confidence and reducing penalty risks. Your ability to explain how cryptocurrency fits into evolving law and retirement planning gives you the opportunity to showcase your interpretive and planning skills. Share the extensive analysis humans bring to areas where automation stops.
Using Technology to Enhance What You Do
Technology should be your friend, not an advanced threat to the practice. You can report digitally, access client portals and automate workflows for transparency with clients, with more time left for high-value conversations. Use technology to automate routine tasks so you can make decisions and interpret results.
Rather than simply replicating what clients can do for themselves, inform them about the tools you use and the context in which you apply them in the greater planning framework. Identifying where automation is appropriate and where judgment is critical will reinforce your credibility.
Building Durable Client Relationships Alongside Automation
Responsiveness, anticipation and accountability are critical in long-term relationships. Regularly check in on expected life events, changes in goals or regulations to show your role is not just algorithmic nudges. Collaborating with tax professionals, estate planners and other experts further differentiates your service from technology-based alternatives.
AI delivers massive efficiency by leveraging market trends and client preferences, enabling you to reach out at key moments. Advisory and open processes help your customers understand how your guidance evolves. When perceived as a complement rather than a substitute, increased automation allows you to adopt a more calculated role.
How to Position Your Human Advice for Long-Term Relevance
More people can use basic financial planning tools due to robo-advisors. However, they can't replace the judgment, coordinated planning or relationship-driven advice from human advisors. A need will always exist for financial advisors who can articulate what human-led planning can deliver. Instead of seeing computers as competition, see them as an opportunity to convey your value better, direct your influence and lead the conversations automation can't touch.
Related: Why Clients Won’t Buy Your Real Estate Advice Until They Trust Your Tax Knowledge