Robo-advisors — a disparaging term for online advice platforms that some advisors fear will soon be eating their lunch — have become a topic of much advisor soul-searching and teeth-gnashing.
U.S. firms like United Capital are at the forefront of wealth managers seeking to head off the threat.
But the trend has also caught the attention of the highly developed financial planning community in Australia, whose Financial Services Council recently presented its Deloitte Future Leaders Award to Bree McDonough for her paper The Digital Revolution of Wealth Management. The concerns she addresses will have a familiar ring to U.S.-based wealth managers.
That is because Future Advisor, Wealthfront and Betterment have become well-established in the U.S. In a recent ThinkAdvisor interview, United Capital's Stephanie Bogan noted that Wealthfront has leaped from 0 to 10% of its clients being in the coveted over-50 demographic, demonstrating that online advice has become a genuine competitive threat.
"These startups," writes McDonough in her paper, "are replacing the traditional face-to-face, fee-for-advice models and further fragmenting the advice and distribution bundling. They commonly offer online tools and personalized accounts, then charge a fee for more sophisticated automation and/or scaled advice from advisors with screen sharing and live chat."
Imagine that: free advice, with the fee commencing for mere "sophisticated automation," all a prelude to a live chat with an advisor.
At one point in her paper, McDonough teases us with a future customer experience "offering live-like interactions with financial advisors … through holography" and secure exchanges through "biometric electronic signatures."
But the thrust of her paper focuses on today's wealth management experience, and it is her contention that client expectations now exceed current service models.
"Growing beyond face-to-face service, paper processes and fee for advice models, customers now live in a social economy with real-time, anytime, anywhere expectations," she writes.
For example, in Australia, like the U.S., the majority of people have a smartphone, and yet a minority of Australian businesses has mobile-optimized websites.
