It’s only naïve advisors who discount machines as legitimate competitors. Considering that machines are as dumb right now as they are ever going to be, and that their capability is increasing exponentially, this is a bad idea.

Bottom line: Will machines dominate the financial services industry? Yes. It’s just a matter of how quickly, which segments and in what order. The fact is that machines get two times as smart every 12 to 18 months, and have been doing so for five or more decades (this is known as Moore’s law). How many financial advisors do you know who are twice as effective and twice as smart as they were two years ago?

Competition from technology will continue to get stronger, better, faster and more effective. Those advisors who try to compete on the basis of “hard skills”—things like crunching numbers, aggregating data, automating follow-up, portfolio construction and management, creating reports, and other things that are machines’ strengths—will likely not survive.

Simply put, you do not want to compete with machines. Only in the movies do humans win that battle. Smart human advisors will not attempt to compete but recognize that highly intelligent, fast machines and applications can help them deliver more client value while reducing expenses. They’ll get great at the things machines can’t do and find difficult to master: the “people skills.”

Think of another disruption that happened decades ago in the music industry—when the drum machine was invented, much to the dismay of many drummers. It’s a device that can be easily programmed to make any drum sound with perfect timing. How did the drummers survive? Many of them didn’t.

But consider Led Zeppelin. Robert Plant may have been the unique voice of the group, but their drummer, John Bonham (“Bonzo” to his fans) was the soul of Led Zeppelin. He brought something intangible to the band that was impossible to replace with a machine or even another skilled human drummer. When John Bonham died, so did Led Zeppelin.

So it’s important to remember that machines have no soul—and (probably) never will.

Just like the drum machine didn’t put the best drummers out of business, “robo” advisors won’t put the best financial advisors out of business. As long as they bring something intangible to their client relationships … soul.

The moral of the story is that it’s a bad time to be average. But average advisors don’t think they’re average. There are more than 300,000 retail advisors in the U.S. Statistically speaking, only 10% can be in the top 10%, right?

What’s the old behavioral finance story about Italian men? When surveyed, 88% claim to be above-average lovers. And 92% of drivers claim to be above-average drivers. The math doesn’t work. Ego prevents us from self-assessing as “average” and since there isn’t an objective test for greatness among financial advisors, denial among them is also the norm.

At the recent Inside Retirement conference in Dallas sponsored by Financial Advisor magazine, Gail Graham, the highly respected industry marketing expert and veteran of Fidelity and United Capital, described advisors’ websites as a “sea of sameness.” In a world where every advisor claims to have a better process, do a better job, provide better service and care more, how often can that actually be true?

Do you remember the joke about the two campers confronted by a bear at their campsite? One camper immediately starts putting on his running shoes while the other camper looks at him like he’s a moron and says, “What are you doing? You can’t possibly outrun that bear!” The camper with the running shoes responds, “I don’t have to outrun the bear. I just have to outrun you.”

Here’s an analogy and an acronym that will help you break out of the “sea of sameness” to outrun the machine bears and other human FAs.

There are 300,000 sailors in the U.S. Navy. Only 2,000 of them are SEALs. Navy SEALs are among the best trained, most disciplined, and highly skilled warriors in the world. The top 1%. The best of the best. Those stats are measurable. Can you imagine a sailor claiming to be as good as a SEAL?

When a defense contractor invents the robo-sailor, which sailors do you think will get replaced first? Which will be replaced last, if ever? Of course. It will be most difficult to replace the SEALs. Not only that, it may never be lucrative to build a machine to replace them. The R&D investment to build a machine that sophisticated with a market of only 2,000 units could be a poor business decision compared to replacing 300,000 units of a simpler device. In order to position yourself to easily steal (rescue) clients from other advisors and insulate yourself from being replaced by even the smartest machines—think and act like a SEAL.

Soul
Like the best drummers in the best bands, bring soul to your client relationships. Master the soft skills, the people skills, rather than being a human calculator, asset gatherer or portfolio manager, jobs easily programmed and done by machines.

Empathy And Emotional Connection
By definition, a machine cannot make a human emotional connection. Unfortunately, most advisors aren’t very skilled at it either. The good news is that for you, a human, this is a choice and a learnable skill. You can learn to engage with empathy.

You know all that “touchy-feely” crap you’ve been avoiding learning for years? Well, it’s time to get over it, learn how to do it and enjoy it. It is your competitive advantage.

You don’t have to be a therapist, but if you’re not connecting emotionally and visibly demonstrating empathy, why wouldn’t people just work with a machine instead?

So ask better questions, become a great listener, connect emotionally and empathize.

Accountability
Right now, machines very effectively inform, educate, strategize, guide people though the financial planning process, build portfolios, assess risk and even give advice.

But it’s still up to humans to implement. And that’s where we humans are weak. Most of us lack the self-discipline and emotional fortitude to consistently take action. No action. No results. Period.

Like a machine replacing a Navy SEAL, it’s hard to imagine a machine advisor that holds people accountable to do what needs to be done and talks them out of doing what shouldn’t be done. That’s a perfect, and very valuable, job for a human.
Accountability is a learnable skill.

Leadership
It’s reasonable to imagine that one of the last things we humans will be willing to do is follow a machine. We can envision armies of machine troops, but we see them being led by human generals and commanders, right?

There are three forms of leadership to master to maintain a competitive advantage over machines and human financial advisors.
Lead yourself to do the things that need to be done whether you feel like it or not. We all get frustrated when our technology crashes, but the hard truth is that machines crash much less than humans. It may be a while before machines can be programmed to emulate soul, empathy and accountability, but they are already programmed to have a great work ethic. They don’t sleep, eat or need rest.

They don’t hit the snooze button in the morning, they don’t have relationship problems or get emergency calls from their kids’ teachers in the middle of the day. Some machines make hundreds of calls per day and are programmed to sound very human. That telemarketer you were talking to the other night was probably an artificial intelligence programmed to sound like your grandmother and engage you in conversation. Don’t hang up so quickly next time and see if you can figure out if you’re talking to a human or a machine.

Self-discipline is really self-leadership.

Lead your team and harness your resources, both human and machine. Be more effective with your planning software, CRM, account aggregation, performance reporting, coordinating with other subject-matter experts, etc. Everyone has the same tools, but only a small percentage of advisors maximize their effectiveness.

Lead your clients to prioritize and take action. Accountability is an element of leadership. Lead with soul, empathy and accountability to help people achieve their goals for the reasons that are important to them.

No matter how good the machines get, a caring human with great people skills combined with powerful machines with incredible technical skills will be the winning combination. The machine can be programmed to do the technical work, but it’s unlikely the machine will ever genuinely care whether the human clients get out of debt, accumulate adequate emergency reserves, own the right amount of all types of insurance to protect against the inherent risks of life, save and invest enough to achieve their goals, reduce their taxes, and complete their legal docs and estate planning.

Even if technology improves to the point where machines can offer financial advice, there is a big difference between being programmed to emulate compassion and actually being compassionate. The losers will be the technician advisors who try to compete with the machines on their turf instead of further developing a competitive advantage with their people skills.

The beauty of becoming one of the best advisors in the business is that you won’t be outrun by the machines and you’ll easily outrun the other advisors.

To learn more about how Bill and his team can help you be a more direct and candid communicator who helps clients make better decisions, schedule your Business Accelerator Meeting today. 858-558-3200/www.billbachrach.com.