Computers are becoming more "human" every day. Ray Kurzweil, Google's director of engineering and an artificial intelligence expert, says in an article in the Guardian that by 2029, computers will have the ability to outsmart humans. They'll be able to understand what we say, learn from experience, make jokes and even flirt. What's more, says Kurzweil, by 2045, computers will be a billion times more powerful than all of the human brains on Earth.
Today computers are ubiquitous, and robo-advisors are here to stay. But can computers replace human advisors? Can they provide suitable guidance and appropriate financial advice? Can they sell annuities? Not quite. At least, not quite yet.
Only about 5 percent of consumers currently use a robo-advisor for at least some of their investment decisions. For now, agents and brokers who sell annuities aren't operating under any threat from computer-generated investment or retirement product advice, but it may be only a matter of time before machines evolve sufficiently to sell in this space.
According to a LIMRA brief, an alarming number of insurance professionals are unfamiliar with robo-advisors and don't believe they will have a real impact on the industry. LIMRA defines a robo-advisor as "an online portfolio management service that provides automated advice based on algorithms. Many, if not all, robo-advisors base their algorithms on modern portfolio theory. There is minimal human interaction, and exchange-traded funds (ETFs) are used to allocate investments based on investor goals and risk tolerance. Robo-advisors currently do not offer solutions to more complex financial needs such as insurance or retirement and estate planning."
Brokers and advisors would be well-advised to learn how to leverage evolving technologies. Robo-advisors — and technology in general — can actually benefit traditional, flesh-and-blood advisors. Technology does not undermine the traditional advisor-client relationship, it enables it.
Robo-advisors need human advisors to grow their business, and consumers aren't using technology to replace professionals, but as a tool to help strengthen their relationship with their advisors, according to research from global analytics firm Cerulli Associates.
