Robo-advisers are here. What’s a human financial planner to do? | Hacker News Reader

Robo-advisers are here. What’s a human financial planner to do?

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25 pointspetethomas9 comments

I'm reminded of something Sir Richard Branson once said, "there is always a market for the best in the world, and cheapest in the world". To me this quote implied quite a few things:

1) There isn't much of a chance being 'in the middle' of price and quality--you'll get beat by competition that focuses on price or on quality.

2) Business is harder at the price end because it's harder to maintain a competitive edge. At this end of the market there are diminishing returns when trying to keep your costs low. You're also at risk of 'technological leap frogging' from competitors who discover a way of doing things cheaper than you.

3) Margins are always going to be tight because there is a race to the bottom.

So, how does this relate to the article? Well I think Robo-Advice is on the 'cheap' end of the market and the solution for human advisers is to go up market.

In this market, economies of scale are based on the size of your clients' investment portfolio.

Sure there will be disruption but there will always be humans who want 'the best' and who will perceive robots to be inferior to humans. The challenge would be to market 'the human touch' as being better than a robot to maintain that perception to your target market.

I think this logic can be applied to most other industries facing the same robot vs human prospects.

Often, while the high end of the market is much more profitable, it's also many times smaller.

Before the invention of quartz and digital watches, every watch was mechanical. These days Rolex is still a premium brand and makes a much higher margin than Casio - but the mechanical watch industry is many, many times smaller than it once was.

A Casio keeps better time than a Rolex. Casio was in the time-keeeping business, and Rolex is in the men's jewelry business.

If you aren't the best or the cheapest in your market, then you differentiate until you are.

I've worked for many years in quant finance, and I can totally understand that the ordinary consumer would rather have a robo-advisor.

Costs are lower, and realistically you are not getting special treatment. You will simply be a financial stereotype (old/young etc) and you'd get the advice anyone like you would get. No point in paying a huge fee to have a real person sit there and tell you the orthodoxy.

For wealthy people, you still want flesh-and-blood advisors. They have special deals that even banks can't get, and they understand your needs (private jet, yacht, staff) and can plan around it.

Don't you think exactly from lower to upper middle class, what most non-financials first need in a financial advice is Knowledge-Made-Simple? People hardly budget, don't plan, don't know how much their non-financial assets depreciate, etc. Hard to get a robo-adviser to work for you, if you don't know what questions to ask.

I see the upside, robo-advisers make financial advisors (not advice) cheaper and thus financial planning more accesible. But it's hard to get someone to think about a personal risk appetite, when they are financially less than fully literate.

Well yes, there's basically no financial knowledge in the general population. Basic stuff like time value of money is simply not known to most people. Then again, most people also don't have any savings apart from a house.

I would suppose any robo-advisor could tell you ordinary things as part of a customer education process.

Haven't people effectively been using robo advisers for a long time already, with human financial planers as glorified frontends? I mean often these advisers might just ask their clients for their data, enter it into a computer, and recommend whatever the computer says? So now people just type the information into a web form.

I admit that my opinion of finance advisers is not the highest. I suspect they are often more salesmen than experts on finance, who simply push onto their clients whatever their company wants to sell at the given moment.

This is not a binary thing. Its does not have to be robo vs human. The company I work for does robo assisted human advisor to drive costs down.

(www.wealtminder.com) messaging is a little off, we are in the midst of re-doing the entire front page.

EDIT: Other similar hybrids of varying human interaction: Personal Capital, Future Advisor

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