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Baby boomers still favour face-to-face financial advice

| Personal Finance

Emotion Gives Human Advisers An Edge

The age of the machine is upon us and financial advisers should get used to robo-advice platforms encroaching on every part of the financial services food chain.

According to Jonty Hurwitz, co-founder of, web- and mobile-based applications are capable of implementing suitable long-term investment strategies at the click of a button, unassisted by human interaction and at a fraction of the cost of traditional advice. He was addressing a ‘full house’ of financial advisers at the third annual i3 Summit, an event hosted jointly by Sanlam Investments and Glacier by Sanlam in Johannesburg, 4 May 2016.

“Venture capital firms have poured more than $2 billion into fintech firms over the past 18 months as they pursue the dream of capturing the way future generations engage with money,” said Hurwitz. His sentiments are backed by statistics from the United States where assets under management on robo-advice platforms are forecast to grow from $15 billion currently to $80 billion over the next three years.
Consumers of fintech products can be broadly segmented in baby boomers (over 50-year olds), generation-Xers (mid-30s to mid-40s) and millennials (18 to mid-30s). “Baby boomers still favour face-to-face financial advice whereas generation-Xers are beginning to move into the world of DIY investing and robo-advice,” he said.

Millennials, meanwhile, are buying into the robo-advice concept in droves. Financial advisers may yet regret having neglected this group as millennials will soon be on the receiving end of the largest transfer of wealth on record, as baby boomers pass on their accumulated wealth to the next generation. Robo-advice grew out of the frustration that unadvised millennials experienced, combined with their growing desire for accessible, affordable, easy-to-use and transparent investment solutions.

The rise of robo-advice does not render financial advisers obsolete. “A study by The Vanguard Group Inc. concludes that advisers can add up to 1.5% to their clients’ annual investment returns by coaching ‘behaviours’ such as encouraging clients to stay calm and preventing them from chasing fads,” said Hurwitz. This is one of the weaknesses in the robo-advice model that traditional advisers will have to exploit.

A robo-advice platform has few behavioural ‘checks and balances’ despite users being able to make major changes to their investment strategies with a few mouse-clicks. Another weakness is the absence of the ‘human touch’ online… Almost 70% of those who use online platforms have indicated that they would like to interact with humans from time to time.

“Robo-advice solutions are impressive, but transacting online is not the same as receiving financial advice face-to-face; nothing beats having someone who can sit with you and work through complex financial considerations,” said Hurwitz.He offered four strategic focuses for human advice practices to employ in their battle against the machines. Firstly, implement a social media strategy wherein as many ‘touch points’ with millennials are created as possible, including on Facebook, Twitter and WhatsApp.Secondly, communicate with clients and potential clients frequently. “Communication is at the heart of wealth management,” said Hurwitz, emphasising that today’s consumers prefer ‘bite sized’, targeted, relevant and timely messages. Video is also a tool that is growing in popularity. Thirdly, engage with clients on an emotional level. “Emotion is a key differentiator and any increase in customer engagement will become the measure of your success,” he said. And finally, educate yourself about the product environment.

For financial advisers to ignore the robo-advice trend would be equivalent to Kodak ignoring convergence in digital technologies, the outcome of which is well documented. “Advisers need to engage with the coming revolution in the advice space – the more they get to know about the new world of digital finance, the better – because they need to be able to recommend the right contemporary product to the right client,” he concluded.

Financial advisers that want to find out what Sanlam Investments is offering in terms of online investment tools, can try out our Smart Invest tool.

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