FT Special Reports Software illo April 2019
© Daniel Pudles

During the 2019 Super Bowl football broadcast, TurboTax online software joined other brands — Michelob-Ultra beer and Pringles potato chips — in broadcasting adverts disparaging robots.

“You’re never going to be emotionally complex enough for that job,” a woman in the TurboTax commercial tells a childlike robot, dousing the computer-animated character’s ambition to become an on-demand adviser for the online tax preparation service.

The Super Bowl advertisers’ bashing of automated services coincides with a recent reckoning for robo­advisory companies: as standalones, they have sputtered and failed to disrupt the incumbent investment service providers.

Betterment, one of the largest US robo-advisory companies, with $14bn in assets, recently offered premium-service investors access to human financial advisers.

Yet even if robo-adviser businesses have failed to fully undermine their traditional human-led rivals, such start-ups deserve some credit for altering how traditional broker-dealers — Morgan Stanley, UBS, Wells Fargo and Merrill Lynch — deploy digital tools.

In recent months, these established networks have hired talent from robo-advisory rivals and expanded their online automated services. Some have also set financial incentives for their financial advisers to encourage clients to use those digital tools.

Each now offers investors, aside from dealings with their human advisers, ways of handling investing tasks online and on their own.

The new tools range from round-the-clock mobile access to investment accounts, user-friendly risk-assessment software, interactive financial planning online services and automated messaging about their portfolios’ performance.

With digital tools, investors gain more transparency and options over how their wealth is managed. These tools also create dangers for clients, however. For example, constant online alerts about portfolios’ balances can also trigger investors to make emotionally driven and potentially unsound decisions.

For advisers, the emerging digital tools also risk making clients needier: since investors receive more information than previously and, as a result, may seek more hand-holding to decipher it. The online services also potentially threaten to make advisers’ own professional services and acumen obsolete.

Ira Mark, an adviser with RBC Wealth Management who is based in New York City, has taken a cautious approach to encouraging clients’ use of digital tools. “It could create irrational buying or selling,” he says.

The new tools also bring advantages, according to some FT 400 listed advisers. Such tools make advisers’ task of communicating with clients more efficient, secure and flexible.

Interactive financial planning online tools can also help aggregate balance and performance information about all the investors’ assets, including those not managed by an adviser. Armed with that information, advisers can persuade clients to allow them to manage more assets — generating higher fees while hopefully improving overall wealth management.

About half of clients handled by Mary Mullin’s practice have entered information about all their assets and begun using the aggregating interactive financial planning tool launched by her employer, Merrill Lynch Wealth Management. Merrill offers its advisers incentives to encourage clients to adopt the tools.

Ms Mullin, who is based in Boston, is against pressuring reluctant clients to use the tools. “If a client is not comfortable doing something, I’m not going to be driven by a compensation incentive,” she says.

However, she regularly carries an iPad to annual meetings with clients that allows her to demonstrate interactive tools, for example by interrogating clients’ home address valuations calculated by the online real estate service Zillow.

Digital tools hardly threaten her own obsolescence and relationship with a client, she says. Instead, “they just enhance it”.

They can also prove an advantage rather than a hindrance among clients who to others might appear to be overreactive to stock market falls, such as those experienced at the end of 2018. When clients called with concerns about falling stock values, they knew more than they would have without the digital flow of information and “allowed us to have more meaningful conversations”, she says.

Kathy Muldoon, an adviser at Carter Financial Management in Dallas, Texas, agrees. Her oldest client is 93 and digitally active. More readily available information about market volatility led to less client anxiety during December 2018 than in the dark days in 2008, Ms Muldoon says. When clients did make inquiries, “it was a knowledgeable inquiry”, she adds, not one made in panic.

Mr Mark of RBC is confident that clients are satisfied with his traditional methods of planning and communicating, although he concedes that some more tech-savvy investors like having mobile access to their accounts.

An increased use of digital tools by clients is inevitable, says David Lund, an adviser at Merrill Lynch Wealth Management in Grand Rapids, Michigan. His practice caters to corporate executives, many of whom use digital tools on their jobs.

“The smartphone is not going away. My clients’ habits of looking at their phone eight or 15 times a day is not going away,” Mr Lund says.

But changing client behaviour poses a tactical challenge rather than a mortal threat, he argues. “It really pushes us as a financial advisory industry to be more attentive to coaching and training and being proactive with our clients.”

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