AI, Big Data and Robos: Could They Replace You? (Hint: It Depends)


A few weeks ago, I attended an industry meeting on financial planning, advice and the future. Because I was a guest and not a speaker, I viewed the conference from a different angle than I am used to – and I have to say, I feel your pain. Some of the speakers lost me during their introductions (and a few were a waste of time) – but fortunately, a few made the day more than bearable. More than anyone else, I was riveted by one speaker discussing the practical innovations of artificial intelligence (AI) on financial planning. But not for the point he was trying to make.

He was discussing how AI was going to allow robo-advisors to provide better planning advice. He suggested that by using AI and big data, robos were going to make financial advice available to everyone by simply asking Siri or Alexa. He suggested that AI would even allow for early marketing to a client. For example, based on age, address and other demographics, they could start marketing on things like “How much do you need in retirement?” or “What is an appropriate withdrawal rate?” to people in their late 50s in certain areas (mid 60s in others). He presented this as a huge opportunity for the robos, but to me, it was a wakeup call and an even bigger opportunity for advisors.

Robo-updated (Robo 3.0?)

Like many of you, when I first heard of robo-advisors (pure algorithmic advice), I didn’t pay much attention to them. While the media called them a disrupter and fretted that advisors would be replaced, I was interested, but thought robos were:

  • Only good for small accounts
  • A nice entry point for younger investors before they were ready for a human advisor
  • Unable to scale to be viable business models
  • Unable to deliver real advice

In our 2015 white paper The Next Wave of Financial Planning, we agreed with our 1,019 advisor survey respondents that robos were “a movement that will endure, but will change to incorporate captive human advisors.” And that is exactly what is happening.

A chart Raef Lee showed in his post, Virtual Advisors: The Robo Threat is Real, listed the top 5 robos by AUM. And with the recent announcement by Betterment, 4 of those 5 now have human interaction (becoming virtual advisors, instead of pure robos). Robos were ok for investment advice, arguably something that is more and more commoditized. But now (with the help of burgeoning AI), it can be better for planning, too (which was always the knock against them). Add to the mix the low cost (25-35 bps) and it does seem like a win.

AI, big data and robos: Could they replace you? (Hint: It depends) Click To Tweet

So what’s the good news here?

During a Q&A, the presenter made a statement that caught my attention. When asked about specific planning ideas or situations, he said, “The data is out there for general financial planning; all you have to do is Google it now and AI will just make it easier to deliver.” In other words, the more general your business is, the easier it is to copy (and do it cheaper). Or to say it differently, the more specialized (or niche) your business is, the harder it would be for AI or a robo to re-create your value add. And this is where the opportunity and future lies for advisors.

Avatar? Persona? Whatever; just use one.

There will always be a need for human interaction in the planning process. The ability to push back, reframe questions and present scenarios that the client/prospect had never entertained is too valuable to leave up to a website. But what is that worth ($) to a client – and more importantly, how do they know there’s a difference? It would seem that the only way to charge a premium price (> 35 bps) is to provide a premium value (duh). But how do you know what the client values? By understanding them, individually, better than big data can. By providing resources that the robo can’t. AI and big data are going to look macro; you need to look micro.

One of my favorite ways to develop this micro look is by creating a persona or avatar. A persona is your typical (or even ideal) client. The persona can be used as a tool to really get to know what your ideal clients value. You can then go deeper by identifying how you can build marketing and advice around what your ideal client wants. You can create services around that persona that says you specialize in them.

For example, think about a persona that focuses on C-level executives in your town that are a) in their 50s, b) have stock options c) are philanthropically inclined and d) are very tax sensitive. Even with the best AI, an 800 number (or point-and-click) virtual advisor probably would not be able to discuss stock option optimization techniques or charitable trust planning techniques in a way that is meaningful and executable. Do you think this persona would pay more than 35pbs for advice? I sure do.

Going smaller

If you want to start getting bigger, compete down the road, or at least justify premium pricing, start by going smaller:

  • Create the persona for a client/prospect that you can add value, above general principles of planning or investment management. Get personal.
  • Get to know the persona by digging deep into their needs and concerns. What are their unique challenges? What are the general principals of planning that don’t work for their situation?
  • Test the ideas. Survey the clients in your book that fit your persona and use it as a way to ask questions and learn from them in your next meeting.
  • Build services unique to your persona. Now that you know the issues and challenges, create a service and product model that suits the persona.
  • Build your brand around it. Don’t be general; be more specific. Look at your website, is it too generic? If it conveys the idea that you are a generalist, change it. Create focus and exclusivity.
  • Leverage and prove the brand. Look at your marketing. Does it reinforce that you know the persona? Do you have collateral material (blog, white papers, etc.) that says you know them and know how to work with them?

The speaker discussed how great it was going to be for robos in the future to provide advice. I think he was telling every planner in the room how to succeed against the robo. They may know the general answers, but only you will know what is right for your clients.

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John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

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