When Robo Advisors Changed Advice

January 23, 2019

Helping Investors
The robos help keep smaller investors in the market and diversified, Rosenbluth says.

“They have a strong suite of products and asset allocation strategies that leverage ETFs, usually from one to two fund families, rather than people having to build these themselves,” he noted.

The asset allocation models are built for strategy, rather than as tactical models, and investors who use them tend to stay put, rather than shifting from one model to another. That “stickiness,” as Rosenbluth calls it, likely keeps these investors from darting in and out of the market.

Preti says he hopes that by targeting smaller—often-younger—clients, they’ll stick with him as their wealth grows, an idea he got after working with retirees who had multimillion-dollar portfolios: “They didn’t just wake up with it. I wanted to work with people who could make the early decisions that grow and create wealth without having a CEO job.”

Uniform Management

Batcha’s firm uses a number of different technology platforms and outsources asset management for independent hybrid broker-dealer registered investment advisory firms and for financial planning firms. The platforms allow them to manage portfolios uniformly and at scale cheaply and easier, something they couldn’t do without that technological backing.  “Otherwise it’s messy,” he said.

The type of service is stratified at different asset levels, he notes. For the minimum fee, there may be one conversation yearly with clients, who otherwise can access someone online, similar to how the wire houses use robos, such as Merrill Edge.

Aside from allowing advisors to scale their business, it can also help with tax-efficient rebalancing and creating portfolios that are more flexible.

Nugent says that as advisors focus on personalization, the technology can help to spot client habits by mapping patterns such as when they log on and how they visit their portfolio page. That allows advisors to build rules and a communication strategy around those patterns.

In volatile times, like in late 2018, combining the efficiency of robos with human advice makes a difference, as it’s easy for an investor to become impatient or emotional with investing, Batcha says.

“People are their own worst enemy, and they do the wrong thing at the wrong time,” he said. “It’s another reason why it’s important to combine the technology with advice.”



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