GUEST ARTICLE: Robos Aren't Necessarily Going To Take Private Bankers' Jobs

Clara Shih Hearsay CEO 18 October 2016

GUEST ARTICLE: Robos Aren't Necessarily Going To Take Private Bankers' Jobs

While some may view "robo-advisors" as a cost-saving business model and fear the traditional private banking model is doomed, this article argues the human element will remain vital.

A prominent figure in the world of social media and digital innovation takes a look at the phenomenon of the "robo-advisor" and automation in wealth management and financial services. The author is Clara Shih, CEO and founder of Hearsay, which provides predictive analytics technology. The editors of this news service are pleased to share these insights with readers and we invite them to respond. Some of the examples in this article come from the UK but given the borderless nature of technology the insights should be useful to readers in all regions.

This last decade has been characterised not merely by the immense changes due to disruptive technology, but also the speed at which these changes have taken place. From Uber and factory automation to rocket launches into space, traditional firms and industries are being totally upended.  

Certainly the financial advice industry is in no way immune to these seismic shifts.

Whether it is the Luddite revolts of the early 19th century in the UK or the recent anti-Uber protests by London cab drivers (and those in other countries), history tells us that technological advance is not always readily accepted (nor good for job security). So it is perhaps understandable that some advisors are fearful that their roles will be replaced by bots, artificial intelligence, and algorithms – or at least that the traditional fees they enjoyed will become eroded over time.

Given the complex and emotional nature of financial planning and advice, all signs point to a continued important role for human advisors to play. I do not believe they will go the way of the travel agent circa 2000. The future of the industry is much more likely to be defined by how man and machine work together, rather than how they compete. But how human advisors work and spend their time will change dramatically.

Technology as friend, not foe
Indeed, it is only through leveraging technology that service providers will be able to focus on what human workers are uniquely capable of doing: providing excellent, high-touch client service at scale. It is hard to envisage how a machine could foster such trust, coach clients through gut-wrenching market changes, and cultivate meaningful relationships.

Rather than wringing our hands about robots taking over the world, smart organisations will embrace strategic automation use cases to aid advisor decision-making. Technology will be leveraged to help advisors become much more data-driven in how they spend their time, improving their ability to focus efforts on the highest-value activities, such as which client to engage with and what to say.

Advisors will be empowered to work smarter, not just harder and longer hours. The sheer volume of data held by any one firm is already huge, and it is growing. But because this data is usually siloed and largely unstructured, it can be hard to identify and unlock the vital intelligence that is buried within it. It is only through technologies such as predictive analytics and machine learning that these growing volumes of data can be converted into meaningful insights and suggested next best actions, which can then be used to shape advisor-client conversations and relationships.

Automated processes also play an important role in maintaining compliance with mounting legislation facing the industry. Automation means fewer mistakes and reduced risk of non-compliance, which is good for firms, advisors, and clients alike.

The rise of robos
The rise of robo-advice websites - catering primarily to tech-savvy, time-poor millennials - is already redefining the way advisors and clients interact. Earlier this year, the Financial Advice Market Review (FAMR) released a report on the growth of this market and – while it recognised that the UK robo-advice market was still relatively small, covering less than £1 billion ($1.26 billion) assets - you only had to look across the Atlantic to see its true potential. In 2014, the largest US robo-advice firm alone was handling assets valued at more than 13 times the entire UK market.

But even though the market statistics point to the fact clients are increasingly turning to automated online advice, the vast majority of them would still prefer to speak with a human. The challenge here is that many human advisors are difficult to access, especially for younger clients who spend most of their time online and are less inclined to pick up the phone or book a face-to-face meeting.

To address this challenge, firms need to overhaul and modernise how their advisors prospect, deepen, and grow client relationships through social media, mobile-optimised websites, email and SMS. If they utilise these digital channels, advisors will find it easier to reach and nurture their clients, and will be afforded a greater opportunity to provide thoughtful and relevant advice when the client needs it most; for example, to coincide with the birth of a child or a career change.

Finally, advisors should feel assured that automation is best suited to predictable environments. Whereas humans have the ability to personally reassure and advise clients during sudden market downturns, the jury is still out on how well robo-advisors respond during these situations, as evidenced by US robo-advice firm Betterment's algorithms halting trades during the Brexit vote.

In these most volatile of times, it is unlikely that a machine could replace the work done by a human advisor, but it could most certainly enhance it. Algorithm-aided humans are the future of financial advice, not unlike how spreadsheets became a staple of the banking and accounting profession starting in the 1980s.

About the author
Clara Shih is CEO and founder of Hearsay, provider of the Hearsay 360 client engagement solution for financial services. Shih developed the first social business application in 2007 and subsequently authored the New York Times-featured best-seller, The Facebook Era. Her latest book, The Social Business Imperative: Adapting Your Business Model to the Always-Connected Customer, was released in April 2016. She has been named one of Fortune’s “Most Powerful Women Entrepreneurs”, Fast Company’s “Most Influential People in Technology”, BusinessWeek’s “Top Young Entrepreneurs”, and a “Young Global Leader” by the World Economic Forum. She also has been listed in both Fortune’s and Ad Age’s “40 Under 40" as well as InvestmentNews’ “40 Under 40” and ThinkAdvisor's IA 35 for 35 “5 to Watch". Shih is a member of the Starbucks board of directors and previously served in a variety of technical, product, and marketing roles at Google, Microsoft, and


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