Robo-Advice: Meet the Challenge and Benefit

RIAs have reasons to be concerned about the rise of robo-advice in the financial services market, but there may be benefits for advisors who meet the challenge head-on. One way is to incorporate robo-advice in their businesses, according to the 2016 Scottrade® Advisor Services Registered Investment Advisor Study.* The study finds that more than half of RIAs either currently use a robo-advisor (29 percent) or plan to use one in the next two years (26 percent).

RIAs with less than 10 years’ tenure (40 percent) are more likely than those with more than 10 years’ tenure (22 percent) to indicate that robo-advising is complementary to their business.

The ability to attract younger investors appears to be a key factor for RIAs as they plan business strategies. According to the Scottrade® study, the majority of RIAs say that robo-advice might help them draw younger investors (65 percent). The percentage rises to 72 percent when the audience is narrowed to millennial clients only. Fifty-seven percent of advisors who responded to the survey said that robo-advice offers them a low-cost option. Almost half (49 percent) said it enables them to service lower-asset investors.

RIA concerns about robo-advice range from the quality of service to the impact on the bottom line. Lack of human interaction (68 percent) is the most commonly selected concern. Lack of service (43 percent), lack of knowledge transfer (37 percent), too simplistic (34 percent) and commoditizing their services (31 percent) are also mentioned.

According to the survey, RIAs believe the presence of robo-advisors will put pressure on the industry to lower fees (46 percent) and to be more transparent about fees (38 percent). Sixty-eight percent think that online management services like robo-advising will have a role in reducing the number of prospects for advisors, up from 61 percent in 2015.

How should RIAs respond in the face of these concerns? A previous Advocate article suggested that offering robo-advice may serve as an effective pipeline to an advisor’s full range of services. However, the same article stressed that face-to-face meetings remain a powerful tool, and the most successful advisors may be the ones who offer a combination of technology and personal service.

Resources That May Help

Scottrade® Advisor Services helps advisors make the best choices in technology for their businesses in a variety of ways. RIAs can explore the Scottrade® Advisor Services Strategic Resource Center to connect with organizations that specialize in technology, compliance, research, education and marketing. Many of these resources offer discounts to advisors who custody assets with Scottrade. (Scottrade provides this resource for informational purposes and does not specifically endorse any of the businesses within the directory. Scottrade also does not pass judgement as to whether those services are appropriate for specific business needs. Be advised this is not a full and comprehensive list of businesses that offer these types of products or services and that advisors are responsible for doing adequate research before making any purchases.)

Advisors are also free to attend webinars hosted by third-party providers included in the Resource Center. Each month the Advisor Advocate includes information about upcoming webinars. Advisors should also check their inboxes for reminder messages. These webinars can be a great way to become familiar with a firm’s products and ask questions to determine if a product is the right fit.


*About the 2016 Scottrade® Advisor Services RIA Study

The 2016 Scottrade® Advisor Services RIA Study was conducted July 25 – Aug. 9, 2016, in collaboration with Harris Poll, an independent third-party research firm not affiliated with Scottrade Financial Services, Inc., its business units or subsidiaries. The 303 Registered Investment Advisors were aged 18 and older and were employed at firms managing at least $10 million in assets under management.

This online survey was not based on a probability sample, and therefore, no estimate of theoretical sampling error can be calculated. For more on the 2016 Scottrade® Advisor Services RIA Study, visit the Scottrade® Advisor Services RIA Study site at

The information and content provided is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product, or an endorsement or affirmation of any specific investment strategy.