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Traditional financial advisors need to be innovative and stay up to date with technology if they are to survive the challenges posed by robo-advisors.

That was one of the messages that emerged from a feisty debate on Tuesday at the Inside ETF conference, sponsored by ETF.com, in Florida.

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“Technology is here to stay and if we don’t provide our clients with the same kind of service (as the robo-advisors), we will get crushed,” said Ric Edelman, chairman and CEO of Virginia-based Edelman Financial Services LLC.

The debate topic was The Future of Financial Advice — Man vs. Machine. In one corner was Adam Nash, cofounder and chief executive officer of Wealthfront Inc., the California-based automated investment firm that has grown to a robo-advisor kingpin by pulling in US$1.8 billion in assets under management since it opened its doors in August, 2012.

The other contender was Edelman, a proponent of “high touch” advice. Edelman, who founded his firm in 1987, has built a nation-wide chain of independent wealth management franchises in the U.S. by promoting financial advice through books and radio and television appearances.

Robo-advisors are online programs that typically develop automated asset allocation plans for clients, based on their individual profiles. For low fees — in the range of 25 basis points a year — robo-advisors recommend low cost ETFs to fulfill the recommended allocations, then provide ongoing monitoring and rebalancing.

Similar programs are being implemented on a grand scale by U.S.-based product sellers, such as Charles Schwab Corp. and Vanguard Group Inc.

“Technology is allowing for investment strategies that were only available to institutions a few years ago to now be available through software,” Nash told conference attendees.

Nash is a former executive of LinkedIn and Ebay Inc. who has become a pioneer of automated financial planning and investing. The majority of Wealthfront’s clients are under 35 years of age.

Edelman said that any advisor who is making price or performance his or her value proposition is vulnerable to robo-advisors: “You cannot do it cheaper and you cannot make clients more money. Developing a personal relationship is the only way an advisor can survive. You need to develop a broad-based financial plan covering all aspects of your clients’ financial situation. This is something the robo-advisors can’t offer, at least not yet.”

Nash said his young clients “truly love” the technology-based experience.

“Our clients would pay us to never call them,” he said in reference to his clients’ preference for texting and computerized communications. Nash noted that Edelman’s clients are “are baby boomers who delight in getting the personal phone call.”

Nash said there is a big audience of people that don’t meet the minimum account sizes of financial advisors and don’t want to pay high fees.

“I’m building a service for the millennium generation,” he said.

He said young people react differently to market volatility than baby boomers whose retirement nest eggs are at stake.

“If their $40,000 account drops to a $25,000 account, millennials are not happy but they don’t panic,” he said. “They see their economic future as being more tied to their talents and earning power over the next 40 years of working. The retiree is more likely to panic and think their best-laid plans won’t work out.”

Nash says Wealthfront doesn’t try to be more than a “passive investing shop offering low-costs,” although he admitted services may expand as the client base ages and needs become more complex.

“Firms are in trouble if their clients expect them to beat the market and protect them in a downturn,” he said.

On the basis that there is no better way to learn than by doing, Edelman has recently built “Edelman Online,” a technology-based offering similar to Wealthfront. His firm now has 1,000 clients who are accessing financial planners online, but they also have the option of requesting phone conversations and face-to-face meetings.

“There’s no better way to understand something than by doing it,” he said of his new business strategy.

The staying power of robo-advisors will be tested in a severe bear market, he said. Like people shopping in a store, many people say they don’t want help at first, “but then they pick up a sweater, and they want you to find it in their size.”

Edelman predicted a significant retraction is ahead in the number of traditional financial advisors. Firms need to be able to contend with growing challenges and increasing costs of compliance, marketing, branding, technology and staffing, while many of their services are inexpensively available through robo-advisors. The notion that an advisor can run a shop managing $50 to $100 million in assets is dead, he said.

“In the next 10 years, more than half of traditional financial advisors will be gone, they will be absorbed by other firms or go away,” he said. “Half of the advisors out there are 50 or over, and rather than deal with these challenges, they will simply quit and go away and retire. Look at your practice — what got you here today won’t get you there in 10 years.”