The robo-advisor community has initiated contact with plan sponsors across the country, says industry insider Steff Chalk.
Marketing and sales pitches in this segment are polished, Chalk writes in his latest column in NAPA Net the Magazine. In most cases, low fees are the bait, he says, along with efficiency, technology and simplicity. And unfortunately, if a robo-advisor professional engages an advisor’s current client, then the plan sponsor may truly have a fiduciary duty to listen to what is being sold.
Thus, the challenge for an advisor is to remain at least two steps ahead of whomever may be approaching its plan sponsor clients, Chalk notes. To meet this challenge, he recommends taking three steps:
1. Inform clients about the impending onslaught of robo-advisors entering the industry over the next three years due to the low barriers of entry and the ambiguity of what exactly constitutes a robo-advisor. (“Rest assured,” says Chalk, “a large number of start-ups will occur from 2016 to 2018.”)
2. Become an expert in what constitutes a robo-advisor. Consider this a topic for discussion at future quarterly trustee or investment meetings. “A plan advisor’s best defense against robo-advisors is being an expert on robo-advisors,” he asserts.
3. Look at robo-advisors the same as target date funds, emerging growth funds or plan design. “Make sure clients learn of the existence of robo-advisors from their human advisor,” Chalk recommends. “Otherwise, the client will hear the robo-advisor declare emphatically, ‘I’ll be back!’”
In addition to Chalk’s regular “Inside the Plan Sponsor’s Mind” column, the Winter 2015 issue of NAPA Net the Magazine includes the cover story on making the ROI connection between the bottom line and employee well being, as well as feature articles on robo-advisors’ entry into the 401(k) market and preparing for the SEC’s coming money market reforms. The issue also features insights from regular contributors Jerry Bramlett, Warren Cormier, Nevin Adams, David Levine, Brian Graff, Don Trone, Joseph DeNoyior, Jania Stout, Fred Barstein and Lisa Greenwald Schneider.
To view Chalk’s column, click here and select “Another Challenge Lies Just Around the Corner.” And to view a pdf of the full 52-page issue, click here.
