The Future Of Financial Advice Is Here. And It Isn’t Robo

The “Robo Advisor”, an unheard-of entity in India barely half a decade ago, has become a household name today. Fuelled by a heady mix of seemingly unending streams of venture funding, no foreseeable need to build sustainable and profitable revenue streams, a burgeoning internet savvy, smartphone wielding retail client base and an unquenchable thirst for alt assets such as crypto and international stocks, Robo Advisors have mushroomed in all areas of personal finance today; ranging from financial planning and wealth management to insurance distribution to lending.

Unfortunately, it’s also quite likely that many of these platforms won’t survive in the long run.

Here’s what’s happening - more and more investors are seeking the personal touch today. They are growing tired of engaging with a machine or an application when it comes to something as sensitive and critical as their personal finances and goals. Instead of blindly buying a basket of U.S stocks, subscribing to an IPO or purchasing cryptocurrency, they are seeking a real person to engage in a meaningful conversation with – one that will result in customized advisory solutions and ongoing layers of engagement and support as they pass through various stages of their financial lives. They are seeking personalization, not “yet another marketplace”.

The trouble is that most of these tech-led platforms are haplessly unequipped to deal with these subtly shifting preferences. They are in too deep with the “product centric” approach of launching new offerings with never ending regularity, to cater to novelty seeking millennials and Gen-Z’ers in search of their next dopamine rush! Building in a human “advisory” layer above this smorgasbord of unconnected products will require an unravelling of their entire business model in most cases. A few are bravely trying, but mostly failing to connect with their “clients” as they are trying to put the cart before the horse in an effort to merely use humans to replicate what their applications do - that is, “sell stuff”.

McKinsey captured this succinctly in their April 2020 piece titled “Service industries can fuel growth by making digital customer experiences a priority”, in which they spoke about how “shared experiences” using co-browsing tools alongside the traditional phone-and-email touch points can make a world of difference to a customer’s perception of service businesses. Indeed, this is what the “phygital age” FinTech client seeks – to peruse a basket of solutions together with their Advisor in real-time, or engage in a “live” portfolio review or financial planning experience with them. They want to do this from the comfort of their homes, yes; but they are starting to understand how important the human touch is in an industry where merely “buying” investment products off virtual shelves is a near guaranteed path to future heartache – when market cycles turn or the fine print comes into focus.

There are two problems at play here. One, the majority of today’s Robo platforms are founded and built by technocrats, not advisors. Naturally, they are fantastic at building high tech platforms, but not very adept at stitching together a seamless Advisory experience for retail clients. Sure – they can hire an Advisory Business Head – but very few will survive the inevitable head-butting that will ensue in the ideological clashes that will follow. Two, their business plans never envisaged an (expensive, no doubt) Advisory layer between their product suites and their customers (or should we call them “users”?). So, when they do build in a layer, the entire focus shifts towards “monetizing” their clients and “recovering” advisory costs through sales of products. RIP, Advisory. RIP, client experience! And voila, disgruntled and disillusioned clients begin relinquishing their platforms in hordes.

There’s a brave new world in the making for Advisory; and while it hinges on technology, that technology has to go beyond UI/UX and enable Advisors to create fantastic experiences for their clients. For many, it will require going back to the drawing board and re-working their entire propositions. For new players, it marks a fantastic opportunity to bring in the best of both worlds for clients who are exponentially more receptive towards remote investing today than they were say a decade ago.

However, it will require patience, a sustainable revenue stream that strikes a win-win between the client and the business – and an unrelenting focus on the client experience. It’ll be interesting to see who ends up winning the race.