Advisors everywhere are weighing the pros and cons of adding technology to their practice, especially "robo-advisor" platforms. But it’s also the time of year when clients bring in their 401(k) expecting solid, fresh and timely allocation advice from their advisor. Can a "robo" really save advisors time and offer personalized recommendations by delivering advice on qualified plans? 401K GPS has some thoughts on the topic.

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ROBO-RETIREMENT:THE NEW AI (ADVISOR INTELLIGENCE)
What’s a “Robo”?
As it turns out, few investors
know much about “robo-
advisors”. A recent Wells
Fargo/ Gallup survey1 showed
only about 5% of U. S. investors
had used one or were highly
familiar with them.
So while some investors may
feel that “robos” are less
expensive and simplify the
investing process, most believe
that human advisors are better
at helping them understand
their investments, making them
feel confident about their
investments and advising them
on the risks they are taking.
How to IncreaseYour Retirement Plan “AI”
So…robo, or not?
It’s important that advisors
consider adding some level of
“digital advice” to their practice
offering moving forward…
whether they work with a true
“robo-advisor” or not. A little
over 70% of U.S. investors feel
that online or digital investing
tools are an important source
of financial advice.2 It’s likely
that many investors – especially
younger ones – will seek out an
advisor that offers digital advice
along with more traditional
financial planning services.
1 Wells Fargo/Gallup Investor and Retirement
Optimism Index survey (May 2016)
2 Wells Fargo/Gallup Investor and Retirement
Optimism Index survey (Jan-Feb 2016)
The algorithms used by many robo-advisors take into
account the value of an investor’s employer-sponsored
plan (ESRP) but don’t offer specific recommendations
on those assets, leaving the ultimate choice of funds and
investment allocation up to the investor.
Here’s a “robo-lite” option: 401K GPS
We know what advisors need: a simple and effective
way take the guesswork out of ESRP investing for
their clients. They want to do the right thing, but
making fund and allocation recommendations is
sometimes a challenge.
Advisors are looking for help, too.
For most investors, their ESRP is their largest retirement asset…yet nearly
half of all plan participants lack confidence in their ability to make the right
investment decisions.3 And when faced with three key roadblocks to
confident retirement investing – inexperience, inattention and inertia –
investors really do want (and need) the help; over two-thirds wish they
could get personalized investment advice for their ESRP, and over half just
want it to be easier.4
3 Federal Reserve, Report on the Economic Well-Being of U. S. Households in 2015 (May 2016)
4 Charles Schwab, 2015 401(k) Participant study
We take that burden off advisors so they can focus on delivering
more value to their clients. Contact us to learn more.
Robo-advice is tougher for retirement plans.
Many advisors struggle to give solid investment
recommendations on ESRPs: they don’t have direct
access to the assets, and often extensive plan investment
options makes developing allocations very time intensive.
And many advisors just aren’t sure how to apply a digital
solution to deliver more than a “one-off” client response.
Plan sponsors have their own challenges: over half of
participants freely admit they don’t have the time,
interest or knowledge to manage their 401(k) portfolio.5
Proactive advisors can bring digital tools to employers,
so participants can feel more engaged and confident in
their retirement plan investments.
Don’t forget employers.
5 Charles Schwab, “Bridging the Gap Between 401(k) Sponsors and Participants (2012)
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