Robo-advisors are very much the new kids on the block in the realm of wealth management. CNB reports how analysts have predicted Robo-advisory to grow into a $1.2 trillion industry by 2024. With many eyes turned towards Robo-advisory, concerns have been raised about the dwindling role of human advisors. Historically, offering financial advice has been left to human advisors. However, discussions around the rise of Robo-advisors and how they might one day replace human advice have resulted in the bifurcation of these two modes of advisory. We believe that this is a false binary, and rather than replacing humans, technology is here to enhance. Hybrid models are the most common model deployed to optimise the quality of advisory services. These models utilise a combination of human and digital capabilities, highlighting how both modes of the advisory can be used to support one another. According to research done by Accenture, there is also user demand as clients prefer using hybrid models to manage their finances. Let us dive into why this is the case and how exactly hybrid models operate.
Hybrid Models – Why you should use them
Today’s hybrid models are characterised by a digital platform used by the client, alongside a human advisor who provides the necessary support and information. Under this model, clients will reach out to their financial advisors for support when facing any difficult financial decisions. Tobias Henry writes in “The WealthTech Book” about how in its most basic form, the hybrid model combines the prime components of human-based advice with digital advice. This harmony offers a flexible and tailored wealth management solution to clients of all demographics. The hybrid model is also highly beneficial for financial advisors as the digital component of this approach increases the advisor’s scalability. With digital technology taking care of the laborious and time-consuming backend work, the financial advisor is now able to attract and serve more clients while maintaining high-quality service.
In an episode of Wealthtech Unwrapped, Sam Beeby shares how hybrid models are imperative in this digital age. Sam notes that standalone Robo-advisors are yet able to offer holistic lifetime advice. As a result, a large proportion of Robo-advisory users are those confident enough to manage their finances. April Rudin, Founder and President of the Rudin Group, supports this when she shares how ultra-high net worth boomers have the highest rate of adoption of digital technology. This is because they are mobile, global, and have sophisticated portfolios. Indeed, not every investor is like this aforementioned demographic, confident enough to manage their finances. Thus, organisations should be focusing on providing this hybrid model, making financial planning more accessible to the masses.
Sam also adds that a hybrid model is best equipped to build a user’s trust in technology. Since we have yet to arrive at a stage where everyone is comfortable with fully trusting Robo-advisory, the presence of the human component is critical. Chuin Ting, CEO of MoneyOwl, pushes this point further by sharing the ethics of technology on our podcast. Ultimately, technology is designed by us and is influenced by human biases, good or bad. As a result, technology itself has specific trust attributes that need to be navigated by both managers and clients. To foster a trusting relationship with technology, the human element in a hybrid model is crucial.
Partnerships – Moving Forward
Ultimately, hybrid models bring together the strengths and make up for digital and human advisory weaknesses. Rather than viewing the two forms of advisory in silos, the gamut of positive benefits illustrated here highlight how they should be used in tandem.
Are you looking to create your own hybrid Robo-advisor platform? With years of experience under our belt, we at Bambu are well equipped to service all of your Robo-advisory needs. Contact us at firstname.lastname@example.org to learn more about how we can help seamlessly integrate Robo-advisory solutions and present your clientele with a fluid hybrid experience.