How Financial Advisors Can Compete with Robo-Advisors


As Robo-Advisors Gain Popularity, Financial Advisors Need to Think of Creative Ways to Set Themselves Apart


Since the launch of the first robo-advisor, Betterment, in 2008, robo-advisors have become an increasingly popular tool for people looking to navigate the complex field of financial management. In fact, client assets that are managed by robo-advisors reached nearly $1 trillion in 2020 and it’s estimated that in 2025 that number will jump to $2.9 trillion. That’s why today we’re discussing how financial advisors can compete with robo-advisors.

Robo-advisors typically offer lower fees with no minimum balance requirement, making them a solid competitor in the field of financial management. However, there are still some questions regarding the security, regulation, and performance of such advisors. Below we’ll discuss ways that you can outshine the competition and increase your chance of coming out on top with your current clients and prospects.

Focus on Your Strengths

While robo-advisors come with many benefits, there are many areas where they come up short. Offering advice about someone’s investments is just a small part of a complete financial plan. Robo-advisors are unable to understand the bigger picture of a client’s financial situation and how it may fit into their short- and long-term goals. As a financial advisor, you’re able to examine your client’s entire financial picture including their estate plans, tax strategy, life insurance considerations, and portfolio management, while also tracking broader economic concerns. As people move through life, their priorities and financial goals change with them, and this requires nuanced strategies that only a financial advisor can provide. Being able to work with your clients to develop a comprehensive financial plan that includes retirement, insurance, and estate planning services, on top of investment management is something that a robo-advisor simply can’t do. Spending your time and energy highlighting those services will be key to standing apart from a robo-advisor and enhancing your financial advisory business growth.

Bring Your Personal Touch

The biggest difference between a robo-advisor and a financial advisor is, of course, the human aspect. If COVID-19 taught us anything, it’s that money is an emotional matter, especially when people are dealing with investing in a market that’s volatile and, at times, even downright scary. Many investors need someone they can turn to who can offer behavioral coaching and hand-holding when they get overwhelmed by financial matters. Make the effort to connect with your clients on a personal level as much as possible. This means being there to answer their calls, meeting with them face to face, taking the time to learn about their families, values, fears, and goals, and doing what you can to really bring that personal aspect to the forefront of your services. By offering your clients emotional guidance and real human connection as they navigate their finances, you’ll be able to reinforce why working with you is the better option.

Change with the Times

Evolving with the times is necessary for any business that hopes to find long-term success. As technology continues to advance, financial advisors need to find ways to make those advancements work for them rather than against them. As an advisor, you’re going to have to get creative with the services you offer, as well as how you offer them if you want to keep your edge in an ever-changing field. For instance, developing new services that are linked to things like housing and transportation, things for which clients spend their money, allows you to turn retirement from an ambiguity that’s promised to something that can be bought and paid for with proper planning and expert guidance.

Believe it or not, there are some circumstances in which it can benefit a financial advisor to utilize a robo-advisor. For instance, if you’re an advisor who outsources for investment management, a robo-advisor may be a great option. Or, if you’re in contact with a prospect who doesn’t meet your minimum, providing them assistance as they utilize a robo-advisors services until their assets rise enough for them to be full clients can be a great way to make the competition work for you.

The Bottom Line: How Financial Advisors Can Compete with Robo-Advisors

Although robo-advisors are gaining more attention, they can’t come close to replacing human financial advisors. They may be useful for investors who are just starting out with limited assets, but they fail to provide the full range of benefits that would allow for them to serve as a genuine replacement for traditional, human advisors. Being on-call to answer any questions your clients may have, helping them address any concerns they’re struggling with, providing personal advice, and possessing a broad range of knowledge on financial issues is a valuable resource that can’t be replaced.

At TriCapital, we can offer you the assistance and support you need to grow your financial advisory business so that you can spend more time and resources focusing on your clients. If you’d like to begin a conversation about becoming an independent advisor with TriCapital Wealth Management, schedule a conversation with us today.

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