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The following is a blog post by Raef Lee, Managing Director for the SEI Advisor Network. In addition to writing tips for advisors on technology, Raef is responsible for exploring new services and markets for the SEI Advisor Network. Connect with him on LinkedIn now or follow him on Twitter: @SEIRaefL
Even the name Robo Advisor is derisive. It creates an image of uncaring, lack of humanity, and inflexibility. It is the term that is now being broadly used by advisors to describe the new breed of technical startups (upstarts) that directly connect technical-savvy investors with a suite of analytic tools that allow them to create their own financial plan or investment portfolio. A name this disparaging shows that advisors have some fear of this new model of financial advice.
There are three main types of Robo Advisor:
The fear, uncertainty, and doubt (FUD) have been fanned by all that has been written recently about these companies. The Wall Street Journal did a detailed piece focusing on the cost of robo-advisor services. Finovate has highlighted the venture funding behind these companies.
Whether you think that Robo Advisors are the latest fad that will go away, or a vision of how financial advice will be given in the future, they will definitely disrupt and change the way that advisors interact with their clients.
What it means to you
In our research and discussions with advisors, these are the ways that robo-advisors are most likely to impact you:
So, should advisors be afraid? Robo Advisors will probably succeed in a new market which has largely been ignored by advisors – young, high-income, portfolio accumulators. Advisor sentiment to date has been, “Why go after someone with no money?” Technology-centric solutions may make this client segment profitable.
Otherwise, advisors need not be nervous as long as they: