Yahoo Finance 3 Ways Your Advisor's 'Pocket Robo-Advisor' Makes Your Life Better
Every car needs a driver. That's why progressive financial advisors are investing in powerful, automated investing tools that, ideally, should propel better results and streamline their services. As firms automate as many backroom operations as they can, clients should reap a "face time dividend," say practice management consultants, that delivers on the most important promise advisors make -- insights tailored to your situation and goals.
"In our last survey of advisors, we found that the ones that were really successful were those who were embracing technology," says Mitchell Caplan, CEO of Jefferson National, based in Louisville, Kentucky, and former CEO of ETrade. "If it's done right, you get an advisor who spends more time with you, focusing on your goals. Instead of managing money, they're helping you achieve your goals."
Advisors are sinking money into systems that manage money, churn out reports and automate administration. A survey conducted last spring by Investment News, an industry magazine, found that about 8 percent of large advisory firms offered some kind of robo-advice, and 20 percent plan to offer these services in the near future.
Theoretically, that lowers overhead costs, though consultants are quick to point out that the technology itself comes at a cost, thus canceling out some of the potential savings.
Here are three ways your advisor's whiz-bang technology platform can make your life easier and potentially more profitable.
Less paperwork. Digitizing everything should translate to easier record keeping, if not less. Deborah Fox, CEO of Fox Financial Planning Network in San Diego and an active advisor herself, consults with advisors on how they can work more efficiently.
The robo-services planners use are more sophisticated than those available to consumers, she says. That starts with simpler, smoother administration.
Opening an account should take less than 15 minutes, she says. You should be able to sign all documents digitally. Billing and meeting summaries can all be automated. "Nobody likes to do these things anyway, and it really frees up that time to spend on research," Fox says.
All this saved time should be returned to you in the form of deeper discussions and holistic planning that advisors agree can't be replicated by technology.
Better reports and modeling. One of the biggest wins from technology is forecasting and modeling, consultants say. Building "what-if" scenarios used to be cumbersome, so advisors ran multiple forecasts with a wide variety of variables for only the wealthiest clients.
Now, progressive advisors can run those scenarios regularly so you can adapt your goals and what it takes to reach them to reflect changing economic conditions.
Caplan says clients shouldn't hesitate to ask for what-if reports, especially based on planning discussions with their advisors. Once you've distilled your goals and plan, you can map various routes and see what it would take to hit different types of milestones, he says.
The more complex your situation, the more you need an advisor who can connect all the dots, says Joel P. Bruckenstein, publisher of Technology Tools for Today, a guide for financial service firms.
Simple calculators depend on a lot of guesswork. Investors are especially susceptible to overly optimistic projections of returns, which skews all results based on those rosy outlooks. But a powerful platform used by a smart advisor can integrate tax planning, reasonable rates of return based on history for various types of investments, optimizing Social Security and other factors.
All of that can be crystallized into a simple, custom dashboard that clients can use to track what's happening with their entire portfolio and key segments of it.
"Ask for a document that updates regularly, instead of a huge report that's too dense to digest," Bruckenstein says. "Look at the probability of success of meeting your goals." Customers can also request charts and graphs that translate numbers and progress into easy-to-understand images.
An entry level with an advisor. If your situation is straightforward -- say, a salaried job, employer-sponsored retirement saving plan and homeownership -- you can start a plain-vanilla relationship with an advisor, requesting just the robo-supported reports and paying hourly only for the advice you need, Bruckenstein says. "Tiered offerings" enable you to establish an entry-level relationship with an advisor who has the capacity to quickly accelerate the range of services and advice if your situation changes.
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