Automating Advice: How Online Firms Are Disrupting the Market for Online Advice

The emergence of digital technology and a post-Baby Boomer generation of investors have unsettled the dynamics of the wealth management business. Traditional providers of financial advice must change the way they do business or face radical disruption.

In Automating Advice: How Online Firms Are Disrupting the Market for Online Advice, Celent examines the value proposition put forth by low-cost online providers of financial advice. The report explores the competitive threat these firms pose and suggests strategies by which traditional providers can respond.

Over the last five years, online firms have gained significant market traction, most notably in the domain of investments (where the fragmentation of traditional delivery models and the adoption of passive investing strategies have created fertile ground for disruption), but also in the areas of personal financial management (PFM) and financial planning.

Many traditional advice providers have responded to the threat by moving upmarket. Celent explains why this strategy that may offer only temporary respite, and suggests ways firms can abandon this defensive crouch and build on their inherent competitive advantages.

Celent also considers trends toward convergence taking place as PFM and investment management providers embrace financial planning, and what changing investor expectations mean for both online and real life advisors.

“Traditional advisors and the financial institutions that employ them must put aside legacy practices to deliver digitized advice and, ultimately, digital relationships. In short, they need to take a page out the book being written by the automated providers,” says William Trout, Senior Analyst with Celent’s Securities & Investments Group and author of the report.