The advisory industry is carefully weighing whether robo advisors jeopardize the existence of flesh-and-blood advisors and what, if anything, can be done to combat these interlopers.

“As robo advisors proliferate advisors need to work harder to show the value they provide compared to algorithms,” says Larry Luxenberg, managing partner and chief investment officer of Lexington Avenue Capital Management in New City, N.Y. “Most people would bristle at the notion that they are average but are comfortable turning their financial affairs over to a formula that treats them as average and doesn’t have in-depth knowledge of their situation.”

Although many industry experts think that robo advisors such as New York-based Betterment and Wealthfront of Palo Alto, Calif., aren’t likely to render human advisors obsolete, the automated advice is competition nonetheless. And in the wake of the Great Recession, which deepened investors’ mistrust of the industry, full-service advisors can be vulnerable.

‘NO ROBO ADVISOR CAN MATCH THAT’

“If you’re an advisor running a practice that looks like an old Borders bookstore or an old Blockbuster video store then, yes, you should be worried,” says Steven Atkinson, executive vice president and head of advisor relations at San Jose, Calif.-based Loring Ward, a consulting firm for advisors. “However, if your practice is more like a Nordstrom department store you have nothing to worry about.”

But advisors and their firms are responding to the perceived threat.

“Advisors need to stress how they customize their services for each individual,” Luxenberg says.

“No robo advisor can match that. Everyone has unique circumstances, differing goals and preferences, and a human advisor is best equipped to meet that,” Luxenberg says.

“No one wants to think [of] themselves as average, and the solutions to their problems aren’t average, either,” he says.

CONNECTING WITH CLIENTS

Widely followed advisor Rick Kahler, president of Kahler Financial Group in Rapid City, S.D., says that he is meeting the challenge from robo advisors by continuing to strengthen his entire team’s ability to connect and relate to clients.

“We are not focused just on increasing these skills in our advisors,” he says, noting that the firm is sponsoring four days of intensive training in the next nine months on motivational interviewing, appreciative inquiry, and other forms of nontraditional communication for all employees and their spouses.

Meanwhile, Lowell Putnam, co-founder and chief executive of New York-based Quovo, a financial technology company for advisors, says that the primary message for traditional advisors is to make technology available to end investors.

“The reality is that Gen Yers are the tech generation, and their familiarity with technology gives them a set of expectations when it comes to goods and services,” he says.

Bruce W. Fraser is a financial writer in New York and contributor to Financial Planning magazine. He can be reached at brucewfraser@gmail.com.