Special Feature

A Digital Partnership

A three-part web-exclusive series on working with robo-advisors. Part one looks at the different advisor platforms available from robo-advisors. Part two examines how you can partner with a robo-advisor. And, part three outlines the additional services the advisor can bring to the digital table. Photo copyright: ne2pi/123RF

Technology

Advisors who develop such partnerships could find efficiency and scale in their businesses, which could help improve overall productivity

By Fiona Collie |

Although robo-advisors are gaining ground in the Canadian financial services sector, these start-ups don't have to be competitors for financial advisors. Instead, partnering with a robo-advisor could prove to be a boon for an advisor's practice. 

"The combination of the digital thought process of a robo-advisor merging with the value-add of the advisor is as natural as peanut butter and jelly — the two were made to go together," says Randy Cass, CEO and founder of Nest Wealth Asset Management Inc., in Toronto.

Indeed, such partnerships would help advisors find efficiency and, therefore, scale in their businesses, which in turn would help with the overall productivity. As well, working with these automated platforms can help advisors remain relevant to a younger clientele.

"[Robo-advisors] will really become more important as millennials start to have more money," says April-Lynn Levitt, a coach with the Personal Coach in Oakville, Ont., "because they're definitely more comfortable with technology."

Any advisor, regardless of his or her credentials or business model, could potentially find it useful to partner with an online portfolio management platform — so long as such an option is the right fit for their clients. Some advisor models, however, may be more suited to such partnerships than others.

For example, Pramod Udiaver, co-founder and CEO of Oakville, Ont.-based robo-advisor Invisor Investment Management Inc., sees an easy connection between a company such as his and fee-for-service financial planners because of the way their compensation is structured.

"It gives [advisors] a lot of flexibility in terms of how they want to establish that relationship and how they want to get paid," says Udiaver. For instance, a fee-for-service advisor can charge a separate fee for the creation of a financial plan without worrying about the loss of commissions from investments managed by the robo-advisor, which would charge a separate management fee.

Of course, advisors need to do their homework before striking up such a partnership and having clients sign up. For example, when comparing the different platforms available, advisors should find out about the associated fees and costs, the investment products on offer and the reporting capabilities of the robo-advisor.

Says Tea Nicola, founder and CEO of Vancouver-based WealthBar Financial Services Inc.: "All of these things would be important to an advisor who is evaluating the platform."

Another point for advisors — or firms — to consider when they're looking to work with these start-ups is the regulatory obligations. For example, advisors and the digital advice company need to be very clear about who is responsible for the compliance associated with the account, such as suitability or anti-money laundering requirements.

Says Udiaver: "There's a lot at play that needs to be considered."

Once all of those questions are answered, advisors can decide how to work with a robo-advisor. In some instances, advisors may have all of their clients' assets managed through the digital asset-allocation company; in other cases, they may only refer small accounts. In either situation, advisors will have to decide what services they will provide clients beyond investment management. Advisors might also be able to automate other parts of their businesses through these partnerships, such as the onboarding process or client communications.

One thing to keep in mind is that an advisor's partnership with a robo-advisor does not have to be formalized. So, if clients are curious about these online services, advisors may suggest apportioning a small part of the account to these new platforms as a way for clients to try them out, just as they might do with a discount brokerage account, says Sara Gilbert, founder of Strategist Business Development in Montreal.

"Many clients will have a wealth advisor to manage the strategy part and all the wealth building and wealth protection," says Gilbert, "and the discount brokerage/robo-advisor will be more of their play money."  

 
On Thursday: Skills you bring to the digital table