A recent study projected that the growth of hybrid human and robo-advisors will outpace stand-alone robo-advisors in terms of assets under management in the next several years. Historically, investment management was the purview of the wealthy. With robo-advisors flooding the investment markets offering low-fee, diversified professional management, the investing landscape is evolving.

Following in the wake of the stand-alone digital robo-advisor is a hybrid model, which includes automated and traditional human services. Multiple fintech firms and established businesses are launching hybrid services, and sole financial advisors are creating or buying white-labeled versions of robo-advisors. This frees up more time for what the individual advisor does best, counseling their clientele about the financial future and assisting with their individual circumstances, whether they work alone or for a larger asset manager. (For more, see: What Blackrock's Roboadvisory Entry Means.)

The report by My Private Banking Research projects a robust future for the hybrid robo-advisor. The research suggests that the hybrid robo model will grow to $3.7 trillion assets worldwide by 2020 and $16.3 trillion by 2025, 10% of all investable worldwide assets. These projections contrast with the estimate that “pure” robo-advisors will manage only 1.6% of global wealth by 2025.

Hybrid Robo Offerings

The number of combination human/robo-advisors is growing quickly. Personal Capital and Rebalance have offered financial advisor access to accompany their robo-advisors for a while. BlackRock acquired Future Advisor and combined its traditional asset management firm with the new digital investment platform. Betterment launced a human-robo hybrid called Betterment Premium which provides unlimited access to an advisor, costing 50 basis points. Ritholtz Wealth Management launched Liftoff, a robo-advisor to assist their lower-net-worth clientele. Vanguard Personal Advisors recently came out with a combination offering as well, and Charles Schwab will offer a hybrid option for those with at least $25,000 later in 2017. (For more, see: What's the Best Robo-Advisor?)

The white-labeled robo advisors, available to human financial advisors, is an ideal add on to capitalize on the hybrid-robo trend. TradingFront offers a customizable white label robo-advisor platform for registered investment advisors (RIAs). NestEgg by Vanare helps advisors scale their services by allowing the automated platform to handle routine investing management tasks so that the advisor can add the human touch. Betterment Institutional, Motif, Folio Institutional and Fidelity Institutional Wealth Services are other automated investment platforms partnering with advisors. (For more, see: Robo-Advisors and a Human Touch: Better Together?)

Fintech Movement

The original robo-advisors aren’t the only models driving this trend. Add to the mix of drivers for the hybrid robo advisory model the entire fintech movement, including many B2B technology partners in the banking and wealth management industries. The technology-enhanced B2B providers include some focused solely on banking and wealth management and others with a broader scope. (For more, see: 9 Top Robo-Advisors for Financial Advisors.)

Both the My Private Banking Research as well as another robo-advisory study by Convetit, 11 Robo-Advisory Trends, underscore both the growth of the hybrid model along with the major technological changes influencing the future of wealth management. Educated consumers and the new fiduciary rule combine to hold the financial industry to higher standards. The hybrid model of investment advising is projected to significantly outpace the stand alone robo-advisor, influenced by consumers' desire for human contact and investment efficiency for a lower cost. (For more, see: What's Next for the Robo-Advisor Space?)

The Bottom Line

The financial services industry is undergoing a massive shift and the hybrid robo-advisory model is part of this transition. The next 10 years will likely alter the competitive landscape for financial advisors. There is no indication that technology influenced financial services and products are slowing down. To stay abreast of the industry, financial advisors need to consider new technology models to help grow and administer their practices. Ultimately, the stand alone robo-advisors need to be aware of and adjust to the changing digital investing environment as well. (For more, see: How Will the Fiduciary Rule Impact Robo-Advisors?)

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