Digital advice is here to stay. The key to making the most of out of it? Personalization.

That was the buzzword echoed by three top executives of leading robo firms at SourceMedia’s annual In|Vest conference in New York.

“We need to make customers the center of attention,” said Bill Harris, founder and CEO of Personal Capital, the Silicon Valley-based online financial adviser which scored $75 million in funding last month.

Image: Bloomberg News
Bill Harris, founder and CEO of Personal Capital, shares his view of the role robos will play in the adviser space ten years from now. Image: Bloomberg News

Harris observed that ‘customers always come first’ is the motto of every company everywhere, but is really not followed by financial institutions, which tend to be product-centric, not people-centric. That needs to be changed, Harris argued, before digital advice can be fully and successfully embraced by the modern investor.

Harris calls this strategy “mass personalization,” which merges the two greatest innovations in investment management, in his view, in the last century: Brokerage accounts, the customizable “craftsman,” and mutual funds, the “Henry Ford” of investments.

With robos, advisers can take the same building blocks and personalize them for each client, Harris said. “Ten years from now this will be the dominant way that financial advice is provided.”

For those who have yet to jump on the robo advice bandwagon, whether the customer experience is “world-class” is the first question advisory firms should be asking their platform provider, said Bo Lu, co-founder and CEO of FutureAdvisor, which was acquired by BlackRock last August.

Giving advice based on a holistic picture of the customer’s financial situation will be key, Lu said.

“Robos can no longer be a simple platform that asks clients three questions and then comes back with some options. That’s been done already. Sure it may be digital but it’s not going to deliver the results you want.”

Hyperpersonalization of products and services will be the future of the industry, Lu argued, which will in turn accelerate continuous innovation in retail investment.

In addition to providing curated options that match the unique situation of each investor, an essential component of personalization also lies in reducing the complexity and confusion surrounding those options.

That’s the philosophy Greg Smith, president of Blooom, has built the Leawood, Kan.-based RIA’s retirement-focused digital advice offering on. Blooom has touted its growth, amassing $300 million in AUM in 20 months.

“When the average American logs into their 401(k) account, they are confronted by a lot of choices, with no prices listed anywhere and no way to get information about any of the options,” Smith said, comparing the situation to shopping for groceries while blindfolded.

The complexity leads to two outcomes: People get too overwhelmed to enroll or they guess.
Not only that, the average American pays $150,000 in 401(k) fees in their lifetime, Smith noted, adding the vast majority have no idea they are doing so, or more importantly, why.

The current system is setting up Americans to make bad and uninformed choices in their 401(k)s, he said, at a time when they really cannot afford to with pension funds disappearing. That is why advisers have a lot to offer by delivering curated strategies that are not only comprehensive, but also straightforward.

“It is more crucial than ever that Americans get their finances absolutely correct,” said Smith.