- Where Insurance & Technology Meet

Dispelling the Myth that Robo-Advisors Are The Way of the Future

By Alysha D’Souza, Director of Content, Finaeo

We’ve seen these headlines countless times: Robo-advice is the way of the future or Financial institution introduces direct-to-consumer technology. Many industry experts believe that robo-advisors are on track to replace the traditional roles and responsibilities of human advisory services. As far-fetched as this sounds, it’s hard to deny that the popularity of robo-advice has skyrocketed over the past few years.

Robo-advisors provide fully automated and algorithm-based advisory and wealth management services. They are built to interact with customers directly, often reducing the need for human intermediaries. It’s estimated that robo-advisors manage over $128 billion in assets globally (as of November 2017) – and are on the way to managing $1 trillion by 2020.


There are a few use cases we can point to that robo-advisors (automated technology) have been particularly effective for:

  • Client On-boarding – One of the first steps in engaging with a new client or prospect is to go through a preliminary set of questions to understand their profile and needs. Traditionally, clients would be required to fill out paper forms just to initiate a conversation with a financial advisor – which then need to be faxed or scanned and emailed back to the advisor (or, in some cases, dropped off in-person). Robo-advisors offer the ability to automate required questionnaires and determine the appropriate next steps for the client from there, making the process much more efficient.
  • Task Automation – Several tasks can be automated for both clients and advisors. For example, clients can have more control over their portfolios, make changes or renewals to their accounts and receive immediate responses to inquiries. Advisors can automate client touchpoints, applications and even product recommendations.
  • Data collection and analysis – Robo-advisors offer a more efficient mechanism for collecting and analyzing client data. By digitizing client on-boarding and application forms, data is automatically stored, assessed and used for product recommendations. As the amount of data collected increases with the adoption of robo-advisors, firms can start to better understand trends in client behaviour and purchase patterns. This information can then be used to in several ways such as shaping the firm’s overall strategy and targeted approach to marketing.
  • Improved Customer Support – The advancement of technology has also led to higher customer service expectations. Clients just don’t have the time or patience to deal with legacy systems or response-time delays. With robo-advisors, clients receive immediate, 24/7 customer service – which is a huge competitive advantage for any asset management firm. Clients no longer need dial in and be placed on hold to get through to support centres, or carve time out of their day to visit their financial institution in-person. “Bank hours” are a thing of the past and simply don’t work for the working class of today – especially millennials who are used to instantaneous service and response times. Tech-savvy clients often base their purchase decisions on convenience, and automated technology can help firms compete in this area.
  • Cost-Effectiveness – All of the benefits listed above translate into one very appealing advantage: cost-effectiveness. By utilizing robo-technology to streamline operational tasks, firms save a significant amount of money in human labour and resources.

Contextual Limitations

Now that we’ve reviewed the benefits and use cases of robo-advisors, it’s important to point out one undeniable commonality: they are transactional. They follow a specific set of decision-making guidelines to execute standardized tasks with the goal of getting the client from inquiry to transaction as fast as possible. Although this is beneficial for the reasons listed above, the downside is that robo-advisors have a limited scope when it comes to context and situation-based recommendations.

The issue is that each client’s financial situation – including risk tolerance, goals and knowledge of available products – is unique. Although robo-advisors work well for the distribution of simplified financial products and investment recommendations, it’s very difficult to take clients through complicated purchase decisions that involve more context around their unique needs and wants; life insurance being one example.

Advisors of today are truly holistic in their approach to guiding clients through a wide spectrum of financial decisions and considerations. There are trade-offs for clients to consider when deciding on coverage packages, monthly premiums, investment amounts and how these all tie into the client’s overall financial plan and stage of life – both of which are dynamic and subject to change. For example, the motivation behind purchasing insurance packages for many clients is to ensure the financial stability of their family. Therefore, there is a level of trust involved in working with a financial advisor to help guide the client through these decisions. Relationships like this take time to build and cannot be replaced by technology.

The Value of a Hybrid Model

A recent report by EY on the evolution of robo-advisors lists three essential components that clients value most when seeking financial advice:

  • Performance (Does my financial advisor understand my objectives?)
  • Engagement (Do I have enough touch points with my advisor?)
  • Trust (Can I trust my financial advisor with my financial health? Does my financial advisor have my best interests in mind?)

The same study concluded that although there are sizeable benefits, “robo-advisors are lacking at adapting to changing circumstances and can’t provide life-stage management effectively. They make static assumptions, unlike financial advisors, who adjust investment profiles and strategies over time to match clients’ changing profiles”.

Consultants and research organizations are continuing to study this field to gain a better understanding of what the future of financial services holds. A recent study completed by Accenture on the rise of robo-advice revealed that:

  • 77% of wealth management clients trust their financial advisors and want to work with them to grow and manage their wealth.
  • 81% believe that face-to-face interaction is important

This study looked at both the benefits and limitations of using robo-advisors, and concluded with the following opinion: “There are parts of the client-advisor relationship—such as reassuring clients through difficult markets, persuading clients to take action and synthesizing different solutions—that should remain the province of the financial advisor for the foreseeable future.”

Therefore, we do not believe that robo-advisors are going to completely replace financial advisors. Our view is that the industry is shifting towards a hybrid model in which automated technology accelerates transactional tasks and augments how human advisors interact with clients to meet their individual needs.

What will change for advisors moving forward? 

In order to help financial advisors compete with the speed and efficiency of robo-advisors while still providing the level of support required, we want to direct the conversation around understanding how financial advisors can embrace technology to complement and enhance client relationships. We believe this will be a key factor of success for advisors, insurance providers and wealth management firms alike in the imminent future.

Advisors will learn how to adopt new types of technology that can reduce or even eliminate paperwork, automate traditionally tedious tasks, leverage data more effectively and improve customer service. By offloading fragmented parts of the process, advisors can spend more time on meaningful client interactions, building and maintaining the trust required to truly support their clients. At Finaeo, we believe the future of advice isn’t “robo”, it’s “bionic” – a combination of automated technology and the required human touch. Our solutions are built with bionic advisors in mind, as we believe that technology needs to support the work of advisors in order to truly elevate the client experience.

About the Author

Alysha D’Souza is Director of Content at Finaeo. Alysha started her career leading startup services at the DMZ, North America’s #1 university-based startup incubator. After supporting hundreds of startups with building and scaling their technologies, Alysha joined Toronto-based entertainment scale-up, Wattpad as Talent Manager, Wattpad Studios. There, Alysha honed in on her passion for merging storytelling with technology, and built programming to support Wattpad’s creative entrepreneurs monetize their work. Alysha is the current Director of Content at Finaeo, and is leading Finaeo’s content marketing strategy.

About Finaeo Inc.

Finaeo is a high-growth InsurTech startup revolutionizing the life insurance marketplace with an advisor-first digital platform. The platform’s automated tools and 24/7 concierge support offer unprecedented turn-around times, allowing financial advisors to drastically shorten the ‘prospect-to-policy’ timeline. Finaeo’s deep industry knowledge and tech background puts them in the #1 position to create the digital fabric that powers the global insurance industry. To learn more, visit

SOURCE: Finaeo Inc.