Merrill Lynch chief: Our FAs don't see robo advisors as competition
Merrill Lynch is on a digital roll that's not likely to abate anytime soon.
The firm unveiled its robo advisor in February and new mobile capabilities for its wealthy clients on Wednesday. And Merrill Lynch advisors can expect to see new and upgraded tools later this year, according to Andy Sieg, head of the firm.
These moves are expanding the offerings available to clients as well as the capabilities of advisors striving to serve in more holistic ways, Sieg says, adding that robo technology is spilling over into other parts of the bank.
"This is a key strategic story," he says.
Merrill Lynch's moves come as more brokerages and banks have announced plans to add robo advisory services to their offerings, including some firms who were initially skeptical of such platforms for fear of competing with their own advisors.
Merrill Lynch advisors, Sieg says, don’t see robos as competition. "I think some see it as an innovation lab that is bringing new abilities to them more rapidly,” he says.
Indeed, digital wealth management has moved from the fringe toward the center of the industry.
Lex Sokolin, global director of fintech strategy at Autonomous Research, says it is following the same trajectory that online banking services took.
“Online banking got absorbed into every single bank. Online wealth is the same way. It'll become absorbed and become part of every single asset manager and broker-dealer out there,” he says.
SOURCE OF LEVERAGE
Sieg says that robo advisors are a natural evolution for wealth management.
"When you think about what it really is, it's really taking the core asset allocation process and making it available directly to clients in digital form," he says. "I'm surprised that anyone would say we're never going to do this, because there are elements of it that have existed for maybe up to 20 years."
For example, he points to firm-driven portfolios.
The work financial advisors do builds upon the basic functions of the robo advisor, Sieg says. Clients who only need basic asset allocation can get that from Bank of America's robo advisor, known as Merrill Edge Guided Investing, or MEGI.
"For clients that have more complex needs, this is where a financial advisor's ability to understand all the aspects of your life, that's where their value-add really comes in," Sieg says. "Our FAs don't see MEGI as a competitive offering to what they do. They see it as a source of leverage in terms of broadening their reach."
Many firms are expected to extend their existing capabilities through the use of digital technologies, says Kendra Thompson, global lead at Accenture Wealth Management Services, a consulting firm.
"For clients that have more complex needs, this is where a financial adviser's ability to understand all the aspects of your life, that's where their value-add really comes in," says Andy Sieg, head of Merrill Lynch.
Of the different applications of robo technology, Thompson says "the most important in terms of transforming the industry, is the ability to scale robo advice … as a core extension of goals-based advice across all sales forces and distribution channels."
Her firm expects the hybrid robo advice model to become dominant due to rising demand for digital and human interactions.
"We do not expect there to be any stand-alone robos where there are no humans involved," Thompson says.
GLOBAL PLAYER SCALE
On Thursday, Merrill Lynch said it added enhancements to its mobile apps for wealth management clients, such as a customizable dashboard and the ability to initiate wire transfers.
Sieg says the firm has received positive feedback on its mobile capabilities.
"For Merrill Lynch, this is a place where we have advantages as part of Bank of America because there is a lot of functionality that is being developed within the bank that we can bring to our clients," he says. "We have had and continue to have a lot of technology investments in the tools that advisors use in terms of the conversations they have with clients in goals-based investing."
Thompson says her firm foresees there being three primary buckets in which wealth management firms strive to operate in the future: the sub-one million client, the high-net-worth client and the ultrawealthy. Few firms are capable of competing in all three areas, nor should they, she says.
"The universal banks, the global players, might be the only ones that have the breadth to do it," Thompson says.
She adds that in this new competitive environment, there is tremendous innovation coming from existing industry players.
"Our belief is that the ultimate winners will not necessarily be a new brand, it will be existing incumbent brands that pivot fast enough," she says.