Why Consumers Still Need Human Advisors

It’s 2018. You can summon rides with a smartphone app. I bet that you stream music, rather than inserting a CD or cassette. We have companies send us boxed meals based on our personalities. Technology is integrated into our lives in both big and small ways.

This is even true for financial services. With the rise of robo-advisors (that catch-all term for automated or largely automated financial service providers) some advisors fear they may be out of the business.  Similar to the way taxi-drivers see Uber pushing them out.

Are Your Concerned?

Should advisors fear the rise of the machines? A report from Business Insider last year argued that there is a global $2 Trillion opportunity for robo-advisors and that this may be achieved by 2020. Seemingly, for agencies that employ robo-advisors, the marketshare is there for taking.

For carriers and companies, robo-advisors offer an efficient way to provide services with low overhead. For consumers, the benefits of using a robo-advisor may be lower fees, active participation, and control. So does this mean that advisors will be the next profession to be outmoded by technology? Not exactly.

As reported in AdvisorNews a pilot Direct to Consumer (D2C) program run by Nationwide in Arizona received low closing ratios, especially on the weekends when, rather than speaking to a live voice, consumers were routed through an online platform. According to Eric Henderson, senior VP or Life Insurance and Annuities at Nationwide, “people still want to talk to somebody.”

While Nationwide will continue to employ technology to keep the consumers on the pilot program’s website, it remains to be seen how these Direct to Consumer channels will fare out. But what then, is the value of an intermediary like a financial advisor if a financial company can advertise direct to consumers and consumers can seek out robo-advisors for their financial planning needs?

Consumers Still Need Us

By and large, consumers will still seek out a knowledgeable live professional. A recent Gallup poll found that U.S. investors greatly preferred a personal advisor. This doesn’t mean that certain consumer segments (like say Millennials) won’t seek out fintech solutions. But advisors provide things that algorithms can’t. For example:

Holistic Approaches – a single financial solution typically doesn’t make for a complete retirement plan. Many things need to weighed and evaluated. Advisors can show a consumer’s financial plan at both micro and macro levels.

Relationship and Trust – It is hard to build long-lasting relationships with an application (Facebook and Twitter notwithstanding). We use technology in many different ways, but when it comes to money and building toward the future, a consumer is likely to seek out a human professional that can earn their trust, versus an efficient piece of software.

Education – Not only can an advisor provide detailed financial solutions, they can break things down in a variety of ways, educating their client throughout the process. An advisor can adjust his or her language to meet the financial literacy of the consumer and tie solutions to the larger picture.

Of course, the best approach is not to reject technology outright. Technology has already changed the way that financial services are conducted. Think about all the producer portals, illustration software, and retirement analyzer programs you use in your day-to-day business. It’s possible to use technology to enhance the human value you provide without replacing it. If you want to stand out and retain more clients as tech continues to evolve how business is done, focus on the human element of your services, keeping one foot in the digital realm and one foot in traditional practices.

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