Despite plenty of hype around the emergence of so-called robo-advisors, nearly half of advisors don’t expect these new players to have a major impact on the industry, according to a recent U.S. survey conducted by Windsor, Conn.-based global insurance association LIMRA International Inc.
In the survey of approximately 300 U.S. insurance and investment advisors, 47% said they view robo-advisors – automated tools that provide clients with investment advice based on their goals and risk tolerance – as having no real impact on the industry.
The survey comes as a variety of robo-advisory platforms have emerged in both Canada and the U.S. in the past year. The survey results suggest that advisors may not be paying enough attention to these new platforms as a potential threat to their business – or as an opportunity, says Scott Kallenbach, research director, LIMRA strategic research.
“I think it would be a good idea for advisors to keep an eye on this,” Kallenbach says. “This is something that could be a disruptor to their business.”
Insurance advisors appear to be paying far less attention to the emergence of robo-advisors, compared with their investment industry counterparts. Nearly seven in 10 insurance agents said they are not familiar with the capabilities of a robo-advisor. In comparison, 71% of investment advisors said they are familiar with them.
Furthermore, of the career insurance agents surveyed, 51% said they don’t expect robo-advisors to have a real impact on the industry, and of the independent insurance agents surveyed, 48% said they don’t anticipate a big impact. That compares with 42% of independent investment advisors.
“In [the insurance] world, they’re not expecting much of an impact on what they’re doing,” Kallenbach says. “Those who have a greater focus on investments, they are more aware – they’re a little more cultured to this.”
Even though most robo-advisor platforms are currently focused primarily on the investment management space, Kallenbach says insurance advisors might be surprised by the impact robo platforms could eventually have on their businesses.
“I think that within the next five to 10 years, robo-advisors will have capabilities to expand their offerings,” he says. “They will be able to take a more holistic view of client needs, and offer not only more sophisticated investment options, but also perhaps life insurance and related products.”
Although some view robo-advisory platforms as a threat to the traditional advice channel, Kallenbach says these tools also present a potential opportunity. Specifically, he says advisors could find ways of incorporating these tools into their practices, as a way to expand their offerings, appeal to younger clients, and help them manage smaller client accounts.
“This will help advisors create that pipeline of potential new clients,” Kallenbach says. “We can use the robo platform to help these clients…and then, as their wealth grows, as we need to offer more sophisticated offerings, then I can start taking a more active role.”
The survey reveals that so far, few advisors are using robo-advisory tools within their businesses. Eight in 10 investment advisors said they are not leveraging these platforms currently and have no plans to do so in the immediate future; and nine in 10 insurance advisors said the same thing.