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How Robo-Advisors are Pushing Personal Financial Advisors to Evolve

What do dinosaurs, woolly mammoths, and sabre-toothed tigers all have in common?

Hopefully this question didn’t make you think too hard – they are all extinct. While I’m sure my old science teacher would tell me this is grossly oversimplified, it seems to me that these species aren’t around anymore because of their inability to react to a rapidly changing environment.

In the financial services industry, change is rampant. Innovative technology is flooding the market at a rapid pace, constantly challenging the status quo for how financial advice is delivered to consumers. Albert Einstein once said, “The measure of intelligence is the ability to change.” At HFG Trust, we welcome change and we certainly aren’t planning to become extinct.

One of the biggest changes we have seen in recent years is the introduction of the online investing platform known as “robo-advising.” For those who have never heard of a robo-advisor before, it’s a digital platform that provides automated, algorithm-driven investment services with very little (if any) human supervision. Clients input their information into the online onboarding system and the robo-advisor creates an investment plan and automatically invests the client’s assets. Given the lack of human intervention, and a virtual-only presence with computers doing most of the work, robo-advisors are able to offer their services for a lower price than the traditional financial advisor.

Credit should be given where credit is due – and robo-advisors do have an impressive technology platform. They are disrupting the norm and creating new ways for clients to approach investing. At HFG Trust, we believe that exciting technology like this, paired with the wisdom, experience, and devotion of our advisors, is the recipe for success – one that goes well beyond the capabilities of algorithms. With that being said, the recent success of robo-advisors in the marketplace highlights the evolution of consumer needs and demands. In the words of the legendary Chinese General, Sun Tzu, “To know your enemy, you must become your enemy.” While that is a bit of an extreme analogy to capture my point, the takeaway is that robo-advisors do excel in certain areas. If that translates to a better experience for our clients, it is something we want to adopt. Here are a couple areas where robo-advisors are influencing our approach to the client experience of the future.

A digital, easy-to-use, and efficient experience is paramount

Robo-advisors do not have a brick and mortar presence. Instead, they offer a user-friendly, digital-only experience through cleanly designed websites and mobile apps. The things we can do while sipping a latte at Starbucks these days are pretty amazing: order groceries, have your next read sent to your doorstep by Amazon, pay your bills, and of course, order your latte so you don’t have to wait in line. It is no surprise that consumers are demanding the ability to review their investment portfolio or even open an investment account from their phone.

Recently, there have been many changes from HFG to improve our client experience on the digital front. We released a mobile app, giving clients instant access to their investment portfolio wherever they are; redesigned our website with relevant, high-quality blog content; and now we are finding new mediums such as texting, social media, and email to communicate with clients more often. Our online client portal displays sleek financial dashboards and a centralized document vault to make it easier to track and monitor progress towards financial goals on the go. Current clients will also notice our Client Service Consultants asking if they’d like to “e-sign” their new account paperwork from the comfort of their own home or wherever they so choose.

We are going to continue to build out our digital presence with online meeting scheduling, face-to-face meeting software, and even a completely paperless and streamlined online onboarding process. In doing this, our focus will always remain on making these tools modern, simple, and easy to use so clients can better collaborate and engage with their advisor and financial plan.

Not every client fits into the same service model

In college, I gave a presentation about the power of the Roth IRA and compound interest (check out Brent’s blog on this topic). I knew there were benefits of socking money away in my IRA; however, there were boatloads of investment options and I had no clue what I needed. Looking back on it today, I didn’t have complex needs at that stage in my life. I wasn’t retiring anytime soon and didn’t need a full scope financial plan. Clearly, all I needed was someone to help me create an investment strategy and put it on autopilot until my financial needs became more elaborate.

This story rings true for a lot folks who, when banded together, comprise the newest generation of investors. They just need a little help getting started. They are a generation of individuals who are very adept at using technology, don’t mind a little “DIY” to get onboarded, and who don’t have complex financial needs at this point in their lives.

At HFG, we want to have offerings to meet the needs of anyone who desires holistic financial advice. We are currently in the process of developing a “robo-esque” service model. At the core, this would mean self-onboarding through our website, a digital financial plan, and access to evidenced-based investment strategies at a price point that reflects fewer touchpoints from advisors. No age is too soon and no dollar is too little. While advisor interaction would be limited, investment portfolios would still be efficiently managed with the same intelligent rebalancing technology robo-advisors are touting. And as always, when a client’s financial situation becomes more complex, a knowledgeable Certified Financial PlannerTM will be available.

Robo-advisors have helped shed light on the fact that digital technology can help deliver better solutions and user experiences. We want to cater to these technology-based needs and combine them with the personal, trustworthy expertise of an advisor. Rooted in the studies of evolutionist Charles Darwin, it was thought that it is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change. Robo-advisors are highlighting the power of new technology and we think it integrates well with what we are doing today, allowing us to deepen our relationships with our clients. In a landscape that is ever-changing, we will continue to strive to adapt to meet whatever new needs our clients have today and in the future.

Drew Westermeyer, COO

Legal Information and Disclosures

This memorandum expresses the views of the author as of the date indicated and such views are subject to change without notice. HFG Trust has no duty or obligation to update the information contained herein. Further, HFG Trust makes no representation, and it should not be assumed that past investment performance is an indication of future results. Moreover, wherever there is potential profit there is the possibility of loss. This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicit and securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. HFG Trust believes that the sources from which such information has be obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. This memorandum, included the information contained herein, may not be coped, reproduced, republished, or posted in any form without the prior written consent of HFG Trust.