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State of Financial Services: Everyone Wins When We Combine High-Touch with High-Tech

06/16/2015 02:21 pm ET | Updated Jun 15, 2016

Financial services (my industry) is on the verge of a renaissance: a resurgence of sophisticated human thought, service and guidance supported by unprecedented technological innovation.

Prepare to witness the rise of the Bionic Advisor.

"Robo" is no passing fad.

We are in the midst of a powerful, disruptive and irreversible evolution of our industry. I'll sum it up in one word: "robo."

"Robo-advisors" are generating headlines and raising VC funding at an impressive clip. In under five years, about 110 robo-advisors have raised approximately $450 million in venture capital funding to support their growth.

Technology that makes investing more efficient and less expensive than ever before is already here to stay; it's just that not everyone is using it. Yet.

But technology's shelf life as a differentiator is fleeting.

It won't be long before digital features like automatic portfolio rebalancing and an "access anywhere" portal become so ubiquitous that they are just "table stakes."

At the end of the day (especially one that includes volatile markets or the realities of life), investors want to know they can talk to a real person who understands their fears and hopes, and who has their best interests at heart.

This is why the combination of high-touch and high-tech is so powerful. Intangibles -- human qualities, strong brands, a fiduciary duty -- will be critical to long-term success. Developing these intangibles presents a major challenge to startups focused on achieving scale and profitability as pure technology companies.

Don't expect the startups to vanquish the powerhouses.

Big brand-names including Schwab, Merrill Lynch and Vanguard are also introducing digital solutions. All told, the 100+ robo-advisor startups manage about $15 billion in total assets -- the equivalent of about only seven of Barron's Top 100-ranked advisors, who each manage roughly on average $2 billion in client assets.

Among investors looking to "go robo," the household names have built-in, formidable advantages of scale and brand recognition that the startups lack. There's still room and time for some of these new robo firms, which have buzz and momentum on their side, to disrupt the status quo and earn a big chunk of market share. But they will have to fight for it, and none among them has yet displayed a sustainable point of differentiation to propel them ahead of the pack.

The big firms also pose the largest threat to traditional brokers and financial advisors. These industry Goliaths are eager to cut out the middleman and use technology to go directly to the client.

Sophisticated fiduciary advisors who embrace innovative technology will thrive.

As I predicted last year, the robo disruption should eradicate mediocre advisors and brokers. Their "value" won't survive when compared to the less expensive digital offerings from the startups and industry behemoths.

High-tech Bionic Advisor - the best human financial advisors using compelling new technologies to better meet the every increasingly complex and demanding needs of their clients in real-time, from anywhere in the world.

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