Last Updated on August 3, 2021 by Carlo Navarro
What a difference a decade makes. Ten years ago, human financial advisors were scrambling to compete with robo advisors. Today, FAs are using robo technology to better service their clients. A new breed has arisen. It’s called the “hybrid advisory firm.”
To avoid confusion, the term “hybrid” has historically been used to describe Registered Investment Advisors (RIAs) who are dually registered with a broker dealer to expand their service offerings. It’s a common model with advisors who want to offer commissionable products alongside fee-based services.
In 2021, dual registered advisors go beyond simple asset management plus commissionable products and offer a full range of services including financial planning, annuities, insurance, and even real estate management in some cases.
Hybrid advisory firms take it to the next level. They employ technology to manage portfolios and expand virtually. There are still humans making decisions and managing relationships, but the machines handle the heavy lifting. With the addition of automation, FAs can scale faster.
Tracking The Evolution of Robo Advisors
The rise of Betterment after the 2008 financial crisis put a serious scare into traditional financial advisors. In the blink of an eye, they had 400 new customers after presenting at TechCrunch Disrupt in 2010. In 2020, they added $10 billion in new assets under management.
However, Betterment is no longer a pure robo advisor. Their premium package, which is available for subscribers with $100K or more in assets, offers unlimited access to Certified Financial Planners. They started with automation and then added humans.
They are not alone. Personal Capital, SoFi, SigFig, and ElleVest all offer human financial advice to go along with their automated portfolios. Schwab is offering “Intelligent Portfolios” on their retail side for premium subscribers ($30 a month, $5000 minimum investment).
The common denominator for these examples is that growth was initially achieved through the robo advisor portion of their offering. Humans were almost an afterthought, but the need for real financial advisors was clear for most investors. They now are being forced to invest in human advice to grow.
The Pandemic Opened New Doors for Progressive FAs
Betterment experienced record-breaking growth during the pandemic, in part due to financial advisors’ reluctance to embrace virtual technology. Communication breakdowns led to lost clients. Robo advisors benefitted from that.
Remote technologies like video conferencing became part of life for clients stuck at home during Covid-19 lockdowns. For advisors who embraced it, clients liked this personal virtual experience. Advisors and clients both have realized that this hybrid approach gives them the personal attention they want and the convenience they need.
The situation opened the eyes of progressive FAs who saw an opportunity to grow by thoughtfully combining automation with personalized service across their business. They are now aggressively moving from accidentally remote to purposefully virtual — the hybrid firm.
How to Become a Hybrid Advisory Firm
If you’ve been in business for a while, there’s a good chance you’re well on your way to becoming a modern hybrid advisory firm. Running Zoom meetings with your clients is part of it. Aggressive automation is another.
The trick is to automate while becoming more personalized. Implementing automation to manage portfolios is the most obvious. But it’s not necessarily the most impactful for scaling
The second component is client service. One of the features that makes robo advisors so attractive is that clients can find the answers to any of their questions on their own terms at a time that works for them. That’s huge. Office hours no longer serve as limits for service. Only automation can make that happen. Adding a help database to your website can expand your service at all hours without requiring staff to be on call.
That leads to the third component: automated communication. By automating reporting and communication you begin to expand when and how often you deliver value to clients. That not only saves time, but can dramatically increase the value your clients feel they’re getting as well as how top of mind you are. That helps improve referrals and grows your business.
Incorporating these three elements into your practice management strategy will make your firm more efficient and help you to grow. The technology is available to do this and robo advisors like Betterment have already demonstrated the advantages of going Hybrid. Now it’s our turn.
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