Articles about robo-advisers and their potential impact appear in various financial news media almost daily, says a new LIMRA survey of financial professionals. However, despite the titillating headlines, LIMRA’s findings show nearly half those surveyed view robo-advisers as having no real industry impact.
Part of the problem may be the name, which evokes sci-fi portrayals of robots. But a robo-adviser is simply a service that provides automated investment advice and can even be a boon to an adviser’s business. Clients provide their investment goals and risk tolerance, and the robo-adviser uses algorithms to provide portfolio management advice, all without a human financial planner.
LIMRA surveyed more than 300 financial professionals, from career and independent insurance agents/advisers to independent investment advisers. Nearly seven in 10 insurance agents are unfamiliar with the capabilities of a robo-adviser, while independent investment advisers (71%) are overwhelmingly familiar with the technology.
While investment advisers may be more familiar with robo-advisers, eight in 10 are not leveraging them currently and have no plans to in the immediate future. Even though robo-advisers are still fairly new to the industry, their potential could represent opportunity for forward-thinking financial professionals and a threat to complacent ones, LIMRA contends.
Current users of robo-advisers tend to be young, more sophisticated about investments and, to financial professionals, they represent tomorrow’s clients. Financial professionals who include technology-driven alternatives into their practice have a better chance of retaining these new investors.
LIMRA states that finding a way to implement robo-advisers in a practice can help financial professionals meet consumer demands more effectively and gain a competitive advantage.