Andrew Edwards: Seizing the Robo-Advising Opportunity



With higher customer expectations for digital experiences, financial service firms need to consider effective and scalable tools. Andrew Edwards, a partner in the Financial Services practice, discusses how robo advising can remove customer service hurdles and deliver better experiences to the client segments that need it the most.

Read the Bain Brief: Are You Ready for Robo Advising?

Read the transcript below.

ANDREW EDWARDS: It's a really exciting time in financial services. There is a lot of change that's going on, and a lot of dislocation, but that creates opportunity. Some of the changes we're seeing are higher expectations from our customers of what the digital experiences are [that] we convey to them, and higher [expectations] from the regulator about how we do it.

The good news is there's also better technology tools and ways that we can meet those hurdles and deliver even better experiences than we ever have to people who really need them. I'll give you a couple examples. First, if you're an incumbent financial services provider with a large direct brokerage channel or large direct channel today, you may have a lot of customers out there who really actually need some financial advice. But they're in that channel because they've been unable to get a financial advisor, often because their accounts are too small or maybe because they live in a rural area. They've been unable to access the financial advice that they need to plan for their financial future. The good news is with scalable digital tools, we don't need their accounts to be as big to serve them effectively.

The second is, you may have an advisors workforce out there that's got a lot of clients who are relatively small or hard for them to serve individually. Those advisors, we find, are often really excited at the opportunity to take those clients who are tough for them to serve and move them to a digital solution where that client's going to have a better experience, going to get a better financial plan. That advisor is going to get more productive, because he's not serving that account anymore, and basically everybody's better off.

Now, there's challenges in both those approaches. If you've got the direct model, you've got to get really smart about your data mining and your digital solutions that you're offering there. You've got to dig in, really identify through your trove of information who are the real people who you can best serve. Move them onto the platform. There is an upsell for them. They're getting a new service. A new stream for you is actually a benefit for everybody.

For advisors, there's lots of things to get right on the change-management side. So the advisor workforce could feel threatened. If you get it right, they won't. But you've got to manage that change. You've also got to get obviously the economics right, so that those advisors are fairly treated with those accounts that they move on to the platform. The good news is all of those things can be done.

We've seen incumbent firms really make ground in these places and we've seen some winning models, and we're really confident that this is an opportunity for big financial services companies to bring a new product to bear to a client segment that really needs it, improve their experience, improve their financial well-being, and also get great economics for the firm as a whole. It's a win-win-win situation for everybody, and it's just really exciting for us at Bain to be a part of.

Read the Bain Brief: Are You Ready for Robo Advising?