For those among you who are not delivering comprehensive financial planning services and are concerned that these robo-advisors are a real threat, I would suggest that you add these services to your offering. Regardless of the claim these online advisors may make, they simply cannot provide the personalized service that financial planners can. So if you’re not already doing so, may I suggest that you adopt the following:

• Offer a fiduciary level of care. I acknowledge that most consumers do not understand the difference between “know your client” and an RIA’s duty to place the client’s interests first and to disclose all conflicts of interest. I am quite certain, however, that those who do will opt to do business with the advisor who must legally adhere to the higher standard of care. If we are to grow this profession and successfully combat competition that will inevitably occur from these robo-advisors, we need to have that fiduciary hat on 100% of the time and act as if every potential client has a complete understanding of what a fiduciary standard of care means, because one day they will. This is not something that can be hidden forever, regardless of how much effort into doing so is made by companies that do not have a legal obligation to be fiduciaries. Putting the clients’ interest first is simply good business.

• Provide true comprehensive financial planning. While some of these robo-advisors may claim to do financial planning, the reality is that they are not structured to do it as effectively as independent financial planning firms are. More and more independent firms are recognizing that their basic service offering is financial planning and not investment management. They understand that structuring and managing portfolios are important ingredients of a comprehensive financial plan, but there are many other services that may be more important.

Clients want plans that take into consideration their values, transitions and goals in many areas of their lives. They want periodic updates on their progress and course corrections when necessary. They appreciate a robust discovery process that helps their advisors understand them and their goals for the future. They need attention paid to their estate plans, risk management, cash flow, taxes, employee benefits and other things that may affect their ability to achieve their goals. Client retention rates in the high 90s are very common among firms whose core competency is financial planning. And most of these firms will not invest clients’ money without doing financial planning. Robo-advisors will be unable to effectively compete in these areas.

• Provide a culture that delivers outstanding service. How many of us have heard prospective clients complain about the fact that they have a difficult time getting their advisors to return calls or schedule regular updates? When they call, they are given many menu options only, in frustration, to get a voice mail. Perhaps I’m old-fashioned, but I believe that clients enjoy speaking to real people when they call. We also believe that clients’ calls should be returned before prospects’. We make sure that their issues are dealt with promptly. If the person they want to talk to is unavailable, they are always offered the option to speak with someone else who may be able to help them. All of the people in our firm understand that our clients are our greatest assets and they are treated accordingly. This will significantly differentiate you from those online advisors who simply cannot provide that level of client service.

Are robo-advisors here to stay? I would think so. But the question is, how will they affect our profession? There will be those who find themselves in a discussion about fees that may be uncomfortable if all they offer is investment advice. However, for those of us who provide true holistic financial life planning, the future is bright, and the fact that robo-advisors exist may be a catalyst for even greater success. It gives us the opportunity to educate our future clients about the difference between advisors who are interested in your portfolio and those who are interested in your life.

Roy Diliberto is the chairman and founder of RTD Financial Advisors Inc. in Philadelphia.

 

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