Riskalyze’s Klein: ‘We Can’t Out-Robo the Robo-Advisors’

With the aid of robo-like technology, advisors can develop those smaller accounts into "full-service clients of the future, and democratize access to great advice for all investors."

So how, exactly, does that work for advisors from a strategy standpoint? By effectively segmenting clients.

"For those under, say, $250,000, they'll receive reduced services and enjoy corresponding low fees, but it will still be services they need. Be honest with them, and inform them that you will do all you can to get them to $250,000 in assets as quickly as you can. Once they reach that threshold, however, they will need to be reminded that the fee increases, but so will their service."

Ultimately, Klein believes robo-advice is changing the industry in three primary ways:

1. Advisors must make a better connection between the fees they charge and the services they provide. If they can't differentiate themselves from technology that can do it for cheaper, they're in trouble.
2. A client's financial future is the last thing they want to risk, so the lowest fee is far from the first virtue. "There is a neck to wring when something goes wrong, and clients want to know they wring it if necessary," Klein quips.
3. Clients are demanding better access through better technology. "One of the speakers said a particular portal looked 'robo-ish,' which means it looked modern and inviting. It might not have to look robo-ish, but it better be simple and intuitive.

It's this last point with which advisors especially struggle, Klein said.

"Advisors say they want simplicity, and then they send us requests on a monthly basis to make it more complicated. We simply say no, because at the end of the day they still want simplicity, and it's something they love us for."

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