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A Tailored Communication Strategy – One Way to Counter the Robo-Advisor Threat

Published: September 21, 2015 by Rob Macdonald, Fundhouse

Blackrock deal shows that Robo-Advisors are here to stay

In a recent series of discussion forums with financial advisers, we looked at the potential impact of on advisers of the growing phenomenon of Robo-Advisors. Whilst this is still a relatively new offering in South Africa, if the US is anything to go by, it is something that is likely to grow, and quickly. The recent deal where Blackrock paid an estimated $150m to $200m for Robo-advisor FutureAdvisor is a clear sign of how seriously some players are taking the phenomenon. FutureAdvisor only has $600m in AUM, which means Blackrock has put a significant premium on its value by paying in the region of $200m.

Some Robo-Advisors dis-intermediate traditional advisers, others help them

Blackrock says this deal is intended to benefit advisers themselves. FutureAdvisor will enable advisers who use Blackrock solutions to automate advice for certain segments of their client base. But this is not always the case with Robo-advisors. Vanguard and Fidelity are using Robo-advice to disintermediate advisers, and dedicated Robo-Advisors like Futurewealth and Betterment are taking on traditional advisers head-on.

To counter the Robo-threat: cut costs, extend services, connect with clients

In a recent article on, Jonathan Stent says that advisers have four ways to counter the Robo-Advisor threat. The first is to cut their own fees to be more price-competitive. Secondly, with the same end in mind, they could cut other service fees, such as fund management, risk products or professional service fees. Thirdly they could extend their services beyond what a Robo-Advisor can offer. Fourthly, they could work on connecting with clients to deepen their relationships with their clients, thereby harnessing the competitive advantage of simply being human.

Connecting with clients is the financial adviser’s key advantage

In fact, the ability to connect with clients is seen as the area where financial advisers have an unassailable competitive advantage over Robo-Advisors. After all we haven’t quite yet reached the stage where humans would rather interact with a machine than another human being. Despite the extraordinary growth in the popularity of computer gaming! So if connecting with clients is where the opportunity lies, how should advisers press this advantage home? The obvious differentiated way to connect is through face-to-face meetings. But this is not the only way advisers connect with clients. Marketing, brand and communication all play a role. Inevitably these three concepts are inextricably linked.

Marketing is an ongoing conversation, Brand is your story

Many will think of Marketing in the traditional 4″P”s sense – product (or service), price, promotion and place. But as Chris Heuer in an article entitled “The Golden Rules of Marketing” highlights that marketing is really a series of conversations between the provider of the product or service and the market to which they wish to deliver their service. Brand, to simplify the insights of Seth Godin, is simply “who you are” as a business. It’s not about the clothes you wear, but the person you are. Philip Marckini, the founder of suggests that the best brands are built by the best storytellers. So in essence we could say that Brand is about the story you have to tell. Which brings us to communication. How do you tell your story? How do you communicate with your clients?

Australian research suggests that the more you communicate the better

There is much research to show that the biggest impact on a client’s experience of financial advice is in fact communication. Recent research by the Beddoes Institute in Australia shows that the more ways you communicate with your client the better. Clients’ perception of the quality of advice received improves, the more channels of communication there are between adviser and client. In other words, the more advisers communicate with their clients, the better. So the obvious strategy to adopt would be to see how to maximize the number of times you communicate with your client. But this would ignore key considerations such as the purpose, quality and channels of communication are all important.

Communication preferences will vary according to the audience

The Beddoes Institute research suggests that at least 4 channels of communication should be used, and when deciding what channels to use, what I regard as the golden principle of communication has to be observed. Namely, that communication is all about the audience. For a financial advisory business, there are probably many ways to segment their audience. The Beddoes research does this along generational lines, namely: Generation Y (younger than 35); Generation X ( 36 to 55); and Baby Boomers (from 55 to 74). There is also the Silent Generation which is over 74, but the research indicates that their preferences are very similar to those of Baby Boomers.

Email reigns supreme when it comes to “one to one” communication

Along generational lines, the research confirms what many advisers would probably intuitively suspect. When it comes to “one to one” communication, all generations prefer e-mail communication but Baby Boomers were the one group that placed a priority on having meetings with advisers at their offices. Both these findings probably reflect the premium that is now placed on time. Email does not require either party to make an appointment. The communication can be handled at any time. In contrast, the Baby Boomers probably have more time available than other generations to actually go to the adviser’s office for a meeting.

Electronic newsletters for all and Apps for the younger clients in “one to many” communication

With respect to “one to many” communication, all generations prefer receiving electronic newsletters, but relative to the others, Generation Y clients have the greatest preference for digital or social media communication, and in this domain, the preference is for Apps rather than other forms of social media such as Facebook, Twitter or Linked In. If advisers see the opportunity in developing Apps for younger clients, it could also be the catalyst for them to embrace the concept of the Robo-Advisor and actually make this part of their offer. Not only will this help with communication but also provide another way to counter the Robo threat. At least three or four advisory businesses in South Africa have already done this.

A tailored communication strategy is key to connecting with your clients

Given the clear preferences that different generational clients have, there is clear benefit to tailor your communications to these preferences. Not trying to meet the communication needs of your different client types is in effect communicating without thinking about the audience. Do this and you will break the golden rule of communication. A tailored strategy will consider different aspects of your audience, “one-to-one” versus “one-to-many” communication, the generation of the client, and the appropriate number of relevant channels.

Skills and resources are key to implementing your strategy

To develop an effective strategy, it is important first to know where you are at now. Conduct a communications audit. Survey your clients about their preferences. That way you can build a communication strategy that meets the needs of your audience. Most importantly, once you implement your new strategy, up-skill and resource your business and team. For example, Twitter and Facebook need constant attention. Don’t use a channel if you can’t manage it effectively. Otherwise your greatest advantage over the Robo-Advisor could be your downfall. The Robo-Advisor is awake 24/7, just waiting for you to slip-up.

Which is why, as a final thought, it may be worth integrating a Robo-Advisor type service into your practice. Then you will counter the threat they pose on all fronts. But even if you do this, remember that communication remains the touch-point that has the greatest impact on a client’s experience of financial advice. After all, your clients, and hence your audience, are human.


Connecting with Clients
Solving the communication matrix for financial advice practices
AFA White Paper, October 2013, Beddoes Institute

The Golden Rules of Marketing
Chris Heuer, 14 March 2008