The rise of automated investment services—“robo-advice” firms such as Betterment, FutureAdvisor and Wealthfront—has many advisors wondering if they will still have a client base in a decade. In the last two years alone, these firms have collectively raised over $82 million in venture capital and now reportedly have over $2 billion under management, primarily from millennial clients.

Although their recent exponential growth is impressive, and the threat they pose is real, they still represent a very small percentage of the overall wealth managed by traditional firms. That said, there has been long-standing fear and uncertainty in the financial industry about direct channels wiping out advisors. These fears are not limited to financial advice. The Second Machine Age, a powerful new book from MIT professors Erik Brynjolfsson and Andrew McAfee, suggests that big data and automation are threatening jobs, not only in manufacturing, clerical and retail but also in professions such as law, education, medicine and, yes, financial services.

Tipping Point
It’s not unlike what Travelocity and Expedia did to travel agents in the ’90s. Over the course of two decades in the U.S., we saw the number of travel retail locations drop from 34,000 at its peak to approximately 13,000 today, mostly a direct result of proliferating automated travel booking sites.

There are two major differences between travel and a financial plan, of course. First, most people know roughly what they are looking for when it comes to travel. Seat 10B on United Airlines Flight 330 is the same whether you purchase it online or pay a premium to have a travel agent book it for you. Second, unlike death, retirement or divorce, travel is generally fun and/or relatively straightforward to plan. Sites like Travelocity have made it very simple to book, so most people are choosing self-service, optimizing for both cost and convenience.

The question is what it would take for similar displacement to happen with financial advice. There are four trends that make this more likely than ever:

1. Online access to trading and transactions. Online trading has been around the longest. In the ’90s, then-upstarts E*Trade, Ameritrade and Schwab emerged, democratizing access to trades and transactions. These Web-first players challenged traditional firms on fees and forced the old guard to get online.

2. Online access to product information described in simple language. Given the regulatory push away from complex products and language by the Consumer Financial Protection Bureau, firms need to simplify how they present investment products. Investors need to understand in simple terms the opportunity, structure and risk associated with the investments being considered.

3. Online access to unique products. Until recently, only the very affluent could access certain lower-fee products when they went through an elite private banking group. This has changed, and today’s offerings like the Wealthfront 500 allow individuals access to investment strategies that normally would only have been available to high-net-worth investors with more than $5 million to invest.

4. Online access to advanced investment algorithms. Advancements in computational power are giving rise to powerful automated investment algorithms that outperform human investment managers in some asset classes. According to CNBC.com, last year only 42% of large-cap core fund managers outperformed the S&P 500 net of fees. When you factor in the average 1% fee advisors charge for advice, some clients last year were worse off than they would have been had they invested in an index fund. In fact, this is a major reason behind the decision by a growing number of advisors to outsource investment management and investing strategies to lower-cost automated funds.

A 2012 study by Northern Trust, for example, found that 50% of advisors outsource investment management activities and that six out of 10 advisors outsource more that half of their clients’ assets. This number is expected to increase because advisors want to spend more time focusing on the unique needs of their clients and adding value by providing a custom level of service as opposed to investment management and time-consuming back-office operations.

What, then, is the fate of the financial advisor?

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