What do four of the five firms with the biggest robo-advisors -- Financial Engines, Vanguard, Schwab and Betterment -- have in common? In the last 18 months, they've all started hiring human advisors in a big way.

Together, the four firms control more than 70 percent of the $83 billion in assets sitting on robo-advice platforms. Financial Engines, by far the largest, recently bought The Mutual Fund Store to build out its human advice offering.

The way in which the advice game is being disrupted, digitized and totally ignored by many ostrich-like advisors and broker-dealers was the subject of a session, "Embracing Robo-Advice" at the Financial Services Institute's annual OneVoice conference in San Francisco. The panelists included Gary Gallagher, senior vice president of investment products at Fidelity Investments; Kevin Knull, president and CEO of PIEtech; Steve Dunlap, COO of FolioDynamix; and Ladenburg Thalmann Asset Management CEO Phil Blancato.

Virtually every industry on the planet is experiencing disruption, and advisors avoid addressing it at their own peril. Knull told attendees the best robo-advisor of all time is WebMD and asked the audience, "How many doctors has it put out of business?"

The answer, of course, is very few. With its millions of users, WebMD has undoubtedly given physicians millions of headaches by providing users with just enough information to be dangerous, resulting in patients calling in a panic asking if they have just been afflicted with bubonic plague after having read something on WebMD. But many patients have ultimately become more educated and have learned to find answers to questions so they don't need to badger their doctors.

Did it help or hurt the medical industry? Knull argued that it helped because the increase in client awareness ultimately proved more valuable than the disruption.

The financial services industry, like so many others, is being digitized, Dunlap said, so the question is whether technology makes advisors more or less relevant. The answer is largely is up to them.
Gallagher noted that Fidelity, which is building a robo-advisor with its eMoney unit, has found that investors using its retail robo-advisors still like to pick up the phone and call a human. In other words, it is not an either/or proposition.

Knull shared some eye-popping results from a survey PIEtech conducted with investors, comparing four different client experiences. Clients were asked to fill out a questionnaire in four different formats: 1. a long paper questionnaire at home; 2. on paper in the office; 3. electronically in front of an advisor; and 4. electronically at home.

PIEtech used biometric equipment to measure clients' stress and analyze the quality of the data. The upshot was that it was stressful and embarrassing to do it in front of the advisor. Some clients have 10 or 12 accounts and don't want to look an advisor in the eye and tell her.

Clients simply would prefer not to admit many issues face to face. So questionnaires filled out electronically at home yielded data quality that was four times better. Clients typically in person told advisors they had two or three goals, but when they completed the survey electronically at home they listed eight goals, occasionally more.

This test was conducted almost entirely with baby boomers, not tech-savvy millennials. "Clients want advisors for the art more than the science," Knull noted.

Needless to say, permitting clients to complete questionnaires electronically at home saves advisors hundreds of hours a year. Gallagher cited a Cerulli survey estimate that as the advisor business ages, there will be a shortage of 20,000 advisors by 2020, only a few years from now.

The evolution of robo-advice, Gallagher predicted, will be similar to the ascendance of discount brokers in the 1970s and 1980s. Ultimately they forced their full-service rivals to up their game and enhance their services. "Where advisors will be valued is on planning, guidance and relationships," he said. "What you are doing today isn't going to get you paid like you are today."

Gallagher pointed to all the concierge physicians who limit their practice to 500 executives willing to pay $1,500 a year to be able to get a doctor on the phone, an impossible task in the doc-in-the-box business format.

In the end, technology is a clear threat to complacent advisors. But it doesn't have to be. "If you don't disrupt your business, you will go out of business," Dunlap said.