Automated Client Service and the Future of Advice

The emerging question of the day is how to combine human advice with digital technologies that make the basics of investing cheap and easy.
PA-020022 OSC2 Fintech-AI_Philip Lindeman-web

Art by Philip Lindeman

A decade ago, the debate over robo advisers and whether they would replace human advisers in the investment management industry was still raging. Reading the headlines back then, it sounded like doom and gloom for anyone who made their living giving investment advice.

Now, that debate is long gone and a new understanding has emerged: Investors—specifically high-net-worth clients—will always want and need a human adviser, especially when markets are volatile, experts say. The new question of the day is how to combine human advice with digital technologies that make the basics of investing cheap and easy. And how can companies provide human advice at scale?

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Scale and the Human Touch

Across the advisory industry, the rise of the hybrid model shows that both pure-play robo advisers and established asset managers are exploring these questions. Many pure-play robo advisers—i.e., those that do not employ large teams of human advisers in their client service models—have partnered with larger financial institutions to make customer acquisition easier and provide specific forms of advice via humans.

Scalable Capital, for instance, partnered with BlackRock in 2017 to help BlackRock’s UK workforce manage its personal investments. Similarly, a large number of big-name investment managers have started or acquired their own robo advisers. Vanguard’s Personal Advisor Services, launched in 2015, is now the largest player in the industry with $220 billion under management. New investors get to speak with a human adviser when they open an account with a minimum of $50,000.

Zaniyar Sharif, managing director at Redesigning Financial Services (RFS), says the industry is in a period of evolution.

“In recognition that they need to provide a human touch, robo advisers are experimenting with how to serve a lot of clients with a few financial advisers, for instance in call-center type models,” he says. “The market is tough. We’ve already seen some robo advisers morph into antithetical trading platforms to find alternative sources of revenue.”

A report by RFS on hybrid advisory models said the ubiquity of robo-advice offerings, together with the automation of middle and back offices, is reshaping the value proposition. The report suggests leading firms will seek to “identify and invest in other ways of differentiating themselves to stand apart from competition, in particular through deeper personalization of customer offerings.”

Partnerships Are Key

As the realities of the new market set in, experts say robo advisers need to continue to partner with other groups to make customer acquisition less costly and provide a more holistic offering, for instance through better investment content or with additional products and services, such as insurance.

David Trainer, the founder of New Constructs, which bills itself as an investment research firm specializing in unconflicted and comprehensive fundamental research, says robo advisers should be offering better equity research to help their customers invest with more intelligence and compete with professionals.

“When robo advisers got their start, we had rising markets,” Trainer says. “It was so easy to pick stocks back then that a robot could do it. In a more challenging market, I think that assumption breaks down. It’s difficult for pure robo advisers to work as well as everyone expects them to. They need more investment intelligence to do that.”

Trainer’s company—which he refers to as a “robo analyst” rather than a robo adviser—performs and provides fundamental stock research in an automated fashion, using algorithms to parse company filings and crunch data. He argues that small investors in particular have a right to more expansive and better investment research than they are getting.

“Robo advisers’ assets under management [AUM] have been stuck at certain levels,” he adds. “There is only so much of the world that is going to trust that the robot can figure it all out. Because it can lack any kind of intelligence about individual securities, a robo adviser is the perfect partner for a robo analyst. A robo analyst can help the robo adviser scale to the next level of AUM, because it can provide human-level sophisticated analytics via machine.”

Banking-as-a-Service Providers

Christine Schmid, head of strategy at additiv, an “embedded wealth” or “banking-as-a-service platform” provider in Zurich, Switzerland, echoes that sentiment. She says technology-based companies have a role to play in lowering the cost of advice, much like they helped decrease the cost of financial transactions over the past decade.

“Bigger banks have already decoupled the price of advice from investment products,” she explains. “Now it’s time for the new players in the market to bring down the price for advice through data, analytics and artificial intelligence [AI].”

According to Schmid, in the same way a third-party payment transaction provider gives a retailer access to the ability collect a bill just when a customer wants to pay it, for example during an online checkout, banking-as-a-service companies such as additiv can give an adviser’s client access to a digital wealth management solution “at just the right moment for the client.”

“What you have seen on the payment side, we are opening up on the wealth side, going beyond the traditional channels,” Schmid says.

A report by additiv says this model, enabled by tech-based wealth solutions, makes it possible for asset managers or independent financial advisers to extend their offerings. According to the report, independent financial advisers can work with firms like additiv to go further than automated investment advisers, for example by offering advisory services at scale within the context of a big company’s financial well-being platform.

The report, published in September, estimates a revenue potential of $100 billion in fees for wealth managers, based on an addressable market of $33 trillion in assets globally which are not professionally managed right now.

An End to the Pure-Play Era?

Experts agree that robo advisers have played an important part in the evolution of investment management, having first helped make investment advice more widely accessible and now enabling companies to strike the right balance between an easy digital investing experience and human advice.

Adam Dooley, founder, chairman and CEO of Belay Associates, a global investment firm focused on the financial services industry, says, nonetheless, people still want the human adviser touch.

“I’m of the view that there are no more pure-play robo adviser startups that plan to manage money or attract clients that are older than 30 or 35 years old,” he suggests. “If they’re out there, they’re not having much success, because people need the advice.”

Besides helping drive down the cost of trading, Dooley says, robots have helped the entire industry by ushering in a whole group of younger investors who were not active, teaching them the value of saving and investing, and familiarizing them with the terminology and the different options.

“Now, when a young investor approaches a human adviser, they’re more knowledgeable,” Dooley says. “Robo advisers have evolved from digital advisers to digital advice platforms. The most leading-edge firms have incorporated digital advice into their service offerings because clients want to be able to speak with their advisers and go online and do basic transactions themselves or inform themselves.”

Similarly, for independent plan advisers and smaller wealth advisers focused on strong relationships with their clients, the digital offering is a must.

“If they want to grow and bring in new clients, the user experience from a digital perspective is critical,” Dooley concludes.

Editor’s note: This story previously appeared on PLANADVISER.com as ‘When Robo Advisers Struggle to Scale.’

A Financial Wellness Case Study

The California-based cold-pressed juice brand Pressed Juicery has embraced a progressive financial wellness program that can help employees address the financial challenges they face at different points in their working lives.
PSPA-020722 Wellness programming_Gizem Vural-web

Art by Gizem Vural

Pawan Kalra, the CEO of Santa Monica, California-based cold-pressed juice brand Pressed Juicery, wanted to provide a financial wellness program with flexible features to accommodate his company’s diverse workforce.

The plan sponsor wanted the platform to address the needs of a wide range of the company’s 700 employees. It had to be robust, with bilingual resources on retirement, saving and investing for retail employees, factory workers, corporate employees and executives, Kalra says. Ultimately, Pressed decided to partner with benefits platform LearnLux on the program.

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“For our teams, what’s been the most exciting is basically being able to have someone help them plan for different life events that they’re going through—whether it’s saving for a down payment, whether it’s how much to invest in a 401(k)—that part is really rewarding to our team,” he says.

But the financial wellness program doesn’t stop with retirement readiness resources.

The LearnLux platform also allows Pressed employees to receive personalized advice and to access resources and information on financial planning for major life events, such as buying a home, saving for college and choosing the best health care plan for their personal situation, Kalra explains.

Personalization is important for Pressed, particularly at the retail store level, because it is often the first job for many workers, who may be getting this type of help for the first time, he adds.

“At the store level, [the program has] really been about saving for college or a specific event in their life,” Kalra says.

He explains that 75% of the workforce is made up of “people of color [and], in our manufacturing locations, that number is 94%.” Women represent about 70% of the workforce in retail, he adds.  

Other employees have used the platform’s savings, debt and credit management to help them better plan their finances, he says. 

“Our teams have enjoyed basically being able to have an open dialogue and discussion with someone,” Kalra says.

Pressed made the interactive platform available to its workforce in December. Since then, it’s been encouraging employee engagement and asking employees to give suggestions on a company Slack channel for topics to cover in the future, he says.

Kalra and Pressed will assess the program’s engagement success at the end of the first quarter of this year, he says. 

The platform will be measured by observing how many workers have scheduled financial planning sessions, accessed the site and used the content, as well as the amount of time they spent engaging with the platform and how many employees attend information sessions, Kalra says.  

The Aim

Navigating benefits can be a challenge for employees, which is why Kalra was inspired to launch a comprehensive suite of financial wellness programming, he says.

“It’s probably uncommon for the CEO to take such a lead role in finding the solution and solving for it,” he says. “But I’m an ex-CFO [chief financial officer], so this is a topic that, for me, is very near and dear, where I’ve benefited from having access to information and understanding it intimately.”

Going through the company resources, Kalra found the plan sponsor was lacking answers about financial wellness.

“It dawned on me, this information is not available to an employee,” he says. “It’s also not well covered as you’re coming up in college and high school.”

Providing a wellness benefit that can be adaptable to a large and diverse employee base also benefits the company by helping to alleviating employees’ financial anxieties, he says.

“Having employees that feel comfortable financially and mentally is a very important element of them basically feeling good about their well-being,” he explains.

Tools Available

Pressed employees have access to many tools within the LearnLux platform, including financial planning appointments with a Certified Financial Planner (CFP).

“What really stood out about the LearnLux platform is we can actually work with them in developing curated content that’s specific to Pressed,” Kalra says.  

“The second is the Certified Financial Planners are having discussions on an individualized basis with our teams,” he adds. It also helps that the platform can work for employees who speak different languages. “I have 700 employees, of which 100 are based in central California and are predominantly Spanish-speaking,” Kalra notes.

The LearnLux platform is also interactive. It includes many different “touch points,” from which the plan sponsor can engage with employees and make even deeper in-roads into their personal situations, Kalra says.

“My expectation is not that you have to be in all of them, but that by just being in one of them it’s going to plant the seed that you want to learn more about this,” Kalra says. “Financial planning is a marathon, not a sprint.”

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