Since 2010, financial advisors have been sounding the alarm over the fintech revolution that has spawned robo-advisors. Although the assets held by robo-advisor firms are still a small fraction of the trillions of dollars held by traditional asset management firms, the direction of the market is firmly moving toward using financial technology, or fintech, solutions. An increasing number of established advisory companies are acquiring fintech firms, investing in them, or partnering with them, ostensibly to compete with the onslaught of fintech innovations that go well beyond robo-advice. With billions of dollars in venture capital flowing into fintech each year, it is quickly getting to the point where financial advisors must choose whether to fight the onslaught or adopt fintech solutions as a way to better serve their clients.

These are four reasons why financial advisors should take advantage of fintech technologies.

Younger Clients Leading the Charge

The two leading fintech firms, Betterment and Wealthfront, launched direct-to-consumer robo-advice platforms in 2008. Through the end of 2015, Betterment had more than $5 billion in assets under management, and Wealthfront had $2.6 billion. Both companies tend to serve younger investors, primarily in the millennial age group, who are attracted by the self-serve digital platforms. Although financial advisors managing the assets of ultrahigh-net-worth individuals (UHNWI) aren’t expected to feel the immediate impact of robo-advisors, they need to prepare for the coming transfer of more than $30 trillion of wealth to the millennials in the next 15 years. If they expect to get any part of it, they must be on the leading edge of fintech technology. Betterment and Charles Schwab Corporation (NYSE: SCHW) now offer digital advisor platforms that mimic the direct-to-consumer platform for automating advice, but they include the financial advisor as an intermediary in the process.

If You Can’t Beat Them, Join Them

Driven by client expectations of "quick, easy and transparent," the pace of fintech technology is accelerating, and it will leave financial advisors who don’t adopt it languishing in obsolescence. Financial advisors who adopt automated, digital advice stand to capitalize on the market trend while adding significant value with the human factor. Robo-advise will never replace human interaction required for more complex financial planning. Financial advisors who offer an omni-channel solution, in which clients can choose self-directed, advisor-assisted or advisor-driven engagement, all on demand, stand the best chance of capturing the assets of millennials and anyone else who prefers to have options.

Independent Advisors Need Scale

Aside from providing digital advice, fintech companies in the investment arena are delivering back-office and client-facing solutions that streamline many of the processes used in onboarding clients, managing their portfolios, offering client portals and managing compliance. Financial advisors working with the larger asset management firms that are investing in or acquiring fintech companies will see their platforms incorporate many of these fintech solutions. However, members of the fastest-growing segment of the advisory industry, which is independent financial advisors, must be able to achieve the technological scale of the big firms if they are going to survive. Fintech can have the effect of leveling the playing field between the big firms and the smaller advisory firms. Several of the largest custodian firms, such as Schwab and Pershing LLC., are developing or investing in proprietary fintech solutions, including a robo-advisor platform for financial advisors.

Harnessing the Power of Big Data

One of the largest contributions of fintech has been its ability to harness, analyze and compartmentalize massive volumes of data. Financial advisors can leverage big data for more efficient and effective prospecting, enabling them to more precisely target markets and better utilize information to engage their clients and prospects. On the investment side, big-data analytics give advisors the ability to better forecast market trends and to foresee the impact of macro events on asset prices. In the near future, investment decisions will be made in milliseconds based on quantitative analysis, giving the edge to financial advisors utilizing the technology. Ultrahigh-net-worth investors will most likely seek out this technology.

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