Ep03 - Rethink: Human vs The Robo-Advisor

Adam Holt and Derek Notman take on a question they say they have been asked for years: whether automated advice will displace human advisors. Their answer is that the framing is wrong, and they trace three waves to explain why. The first wave arrived as a direct-to-consumer threat, the second added human support after the model underperformed expectations, and the third saw advisory firms simply absorb the technology into their own operations for portals, trading, and reallocation. The hosts argue the real exposure sits with advisors whose value is concentrated in product distribution, because distribution is the part an algorithm does faster and cheaper at scale. They quote an early Asset-Map colleague, Steve Amfield, on the idea that advisors competing with technology alone will be replaced by it at a fraction of the cost, then spend the back half of the episode on digital reputation.

• The three waves of automated advice, and how the industry response changed with each one
• Why product distribution is the exposed layer rather than advice itself
• Consumer expectations set by Amazon and Netflix, and what they imply for advisory service design
• Digital reputation as a business requirement, and the one practice model the hosts treat as an exception

Full timestamped transcript.

[00:00:00] H. Adam Holt: Welcome to Rethink: The Financial Advisor Podcast. My name is Adam Holt.

[00:00:06] Derek Notman: And this is Derek Notman. We are your hosts, both veteran advisors and fintech CEOs who challenge the status quo, question everything, and have fun doing it.

[00:00:16] H. Adam Holt: Hear honest commentary on the challenges facing advisors today. And be part of a community where we can all rethink the profession.

[00:00:24] Derek Notman: Now on to our episode.

Adam, I have an interesting question to expand on our last episode. I think this is a fascinating topic, but I'm curious what you think about this. Who is gonna win the robo versus human advisor battle?

[00:00:44] H. Adam Holt: I don't know. Do you know?

[00:00:46] Derek Notman: I don't, but I think that we need to have a good chat about this because I know it's been on people's radars, we talked about in our last episode, but I think there's more to this and it's almost not an advisor battle, I think it's something else.

[00:01:00] H. Adam Holt: There's... Yeah, I tend to agree with you. The, the number of times I've been asked this question is just amazing to me over the past, what, five, six years? Yeah. Do you remember when robo-advice first came out?

Oh, totally. I was googling Betterment and all those things, and I was just freaking out and like, "Oh my gosh."

And, and then about four minutes later, I'm like, "Wait a minute. This isn't that bad." You can't replace human beings. They tried that in The Terminator and it didn't work. Almost. I think, I think we're gonna be okay. Almost, but it didn't, and, and I think we, we mentioned this before, but it was a flash in the pan.

It was new, it was sexy, it was mysterious, and it was online, so we gotta check it out. I think the luster wore off pretty quick, actually.

It's true. I... There was a lot of media s- you know, hype about robo is gonna totally disintermediate the human... I'm gonna call them the financial professional. We both know that the word advi- Yeah

the word advice is getting thrown around way too much now. But as we talked about in our last podcast, I, I really think we all need to make a recognition shift, that identity of who we are as financial professionals really, really matters. We talked about last time by asking the question, are you an advisor that sells or a salesperson that advises?

The important part of that is how you actually get compensated or how your clients think they are compensating you really matters. And this is a question we need every advisor to really start to think about, 'cause it's gonna affect your business.

[00:02:40] Derek Notman: Oh, no question. And if they don't think about it, they will be forced to, but they'll be forced to do it in the rear view mirror.

Mm. And that's a bad place to have to try to figure this thing out.

[00:02:49] H. Adam Holt: It's true. One of the things that's, that's interesting about the whole journey of robo-advice, and also of course as you... Many of... We're also in the fintech world, both of us. We get to see a lot of tech. We see it actually sometimes before other people see it because we're on the circuit, we're running around, people call us and say, "We need your feedback.

Is this gonna work in community?" So we get a little bit of an insight, right? Or we're building something like it ourselves because we see an opportunity. Yeah. But I think there's big nuance here that people need to recognize, and I, I was lucky enough to have a conversation with Michael Kitces, who you know well.

Mm-hmm. And, uh, for those of you- Great guy ... in the space, Michael is a fantastic thought leader in fintech, and has been way before it was. If you get a chance to check out his Nerd's Eye View, it's a fantastic resource for many of us. And this conversation came up, and he used this great terminology similar to what we had actually talked about last time, which was this idea of a financial advisor versus a financial advicer.

And the comments that he made, if I'm paraphrasing it well, Michael, effectively said that there are those that basically lead with advice in all cases, and there are those that use advice to facilitate sales. Now, um, we're not making a value judgment here. 90% of us in the marketplace have some component of implementation for which we get compensated.

Because frankly, if we don't implement, nobody gets healthier, right? If you don't actually-

[00:04:10] Derek Notman: Yeah, exactly. That's so important ...

[00:04:12] H. Adam Holt: do the therapy, right? We're not gonna get fitter just by sitting here and knowing we should work out, right? That doesn't- Yeah ... I don't think that works. Does that work for you?

[00:04:19] Derek Notman: Nope. I sit a lot, too.

[00:04:20] H. Adam Holt: Yeah. Look how healthy you are.

[00:04:22] Derek Notman: Yeah.

[00:04:23] H. Adam Holt: You look healthy

[00:04:24] Derek Notman: for a podcast. Good thing you can't see me on this podcast.

[00:04:26] H. Adam Holt: Thank goodness. That's right, you can always Google me when I look better. 'Cause the good thing about archive is that basically everything's public forever. But I think what's... Here's the debate that we need to rethink, and that is the same thing is true for robo-advice.

Robo-advice 1.0 was about basically providing a way to maybe do some investing, but to get an app on your phone where you had some transparency, accessibility. Mm-hmm. It wasn't actually addressing, "Hey, are we doing the right things by our family? Do you really know me as a robo-advisor? Can you really say you know me and have a relationship with me, know what I care about?"

But I think it's changing. I think there's- It is changing ... a change about to come. What do you think is going on?

[00:05:08] Derek Notman: A huge one. I almost would, would say it's wasn't ever even robo-advice. I don't know why they really used that word. It was almost more robo-investing. What it did do, and I mean this is a whole nother conversation almost, but it almost democratized access-

[00:05:22] H. Adam Holt: Hm

[00:05:23] Derek Notman: to investing. 'Cause at the end of the day, what is a robo-advisor in the eyes of the SEC? They're a registered investment advisor. They manage assets, they do portfolios, right? And before robo-advisors, access to that type of service was reserved for people with means. You had to have some cash. You couldn't open an account for 20 bucks.

I think there's some good that came of it, but people I think quickly realized that, wait a minute, we're missing one major component here, this thing called human advice, right? Where, where did that go? Yeah, this is great, I can invest now on an easy basis from my phone, but I'm not getting the stuff like you just said, it's like, is this good for my family?

How does this fit in with the rest of everything that I'm doing? So I think once that luster wore off, we've now come to this realization like, hey, we really do need human advice, customized, personalized. But what's that distribution look like, right? What, what's that medium, what's the interaction look like moving forward now?

Think about it, like we used to go to a bookstore to buy a book. Remember Borders, right?

[00:06:29] H. Adam Holt: I remember.

[00:06:30] Derek Notman: I actually went to one of their liquidation sales to get some stuff for my brick-and-mortar office way back in the day.

[00:06:37] H. Adam Holt: It's crazy, I- we- What's a brick-and-mortar? I don't get it.

[00:06:38] Derek Notman: Yeah, right. A way long time ago.

Now I get my books from Amazon delivered to my house. I still want a physical book, right? I still buy it, I'm still purchasing that thing, but the distribution of it has changed, and I think that we're on the cusp of something like that for this industry. I don't know, what do you think, Adam?

[00:06:58] H. Adam Holt: No, I think you're right on it, right?

One of the things that we commented on the last time is that if your identity is the distribution of product for which you deliver advice, then you're really competing as a marketplace or as a buyer representative of your- Mm-hmm ... client, right? I'm representing you in the marketplace of a consumption of financial services products, albeit investment, insurance, annuity, whatever it might be, banking.

[00:07:23] Derek Notman: Yeah.

[00:07:24] H. Adam Holt: And that's an interesting distinction 'cause as we both know, that's where most of the margin is. Asking the client to pay for that advice has always been a challenging thing, and I know a lot of us who've wanted to go to fee-based planning is, I think, it... The compensation difference is significant, right?

Getting a client to pay you $10,000 a year for advice to manage their money and their insurance portfolio and their kids and their financial planning seems almost like, wow, sticker shock. Yeah, totally. But when you roll in all of the product and implementations, that's not unrealistic for a family with some means to be paying this in, in aggregate.

And I think what's interesting about this relative to robo-advisor is the following: robo advice, as you just said, as it's being used in the, the terminology, is really robo distribution, and maybe Michael Kitces would call it robo advisor. Okay?

[00:08:14] Derek Notman: Right.

[00:08:14] H. Adam Holt: Right. Which is literally a product-designed technology that makes the implementation of the product easier.

[00:08:21] Derek Notman: And the- And nothing wrong with that.

[00:08:23] H. Adam Holt: No, no, no. That's right, and we should just be honest about what it is. I think the question is, is the robo advisor going to compete with the typical financial advisor? I happen to think that the answer is oh yeah. Big time. Absolutely.

[00:08:38] Derek Notman: Mm-hmm.

[00:08:40] H. Adam Holt: And so the question is, if you don't know your identity coming into this one, in the next couple years, it's pretty clear to me that Effectively, we're gonna need to consider what our real identity is, and can we compete or can we utilize some of these tools as advocates in our own practice?

Can we use a robo, let's say, asset allocator just to drive margin down, right? Drive, drive do- at least the cost. I shouldn't say margin. Can we use a shopping application to go shop for insurances and place and implement literally within days, not months? Can we go shop and, and compare all the different annuities in the marketplace for our clients and basically be a buyer representative if that's an appropriate strategy?

And, and I think that's where we're moving. Robo-advisors will help that .

[00:09:27] Derek Notman: Oh, no question. Yeah, I th- I think you're really... It's a robo distribution model, a robo sales distribution model. I mean, we've been having fee compression for some time now, as we've all seen, and I think that was driven mainly by transparency, right?

All of a sudden, people are like, "Well, wait, I'm paying how much?" Right? "This doesn't make sense," right? Where it, it's been kind of hidden on page 400 of the prospectus or whatever. It's im- impossible to find. So you're having this compression, which I would argue is a good thing, but it's gonna disrupt the space.

Those advisors that are reliant on just distribution of product are gonna be competing now with an algorithm. An Amazon Marketplace of financial products- Mm ... if you will, that can distribute faster, more efficiently, at scale, and cheaper than a human being could ever do that. So now that puts you in a position like, can I compete with an Amazon distribution model?

I don't think any human being could. Mm. But you could leverage it, right? This goes back to the identity piece. Now, if I know, okay, I am an advisor that's going to focus on advice, human customization here, and then we're gonna leverage a marketplace, this robo solution, now this, I think, is a sweet spot. But you have to identify like that if you're gonna be able to take advantage of it.

It's gonna be an interesting dichotomy moving forward. I don't... It, it's, it's exciting, but also a little, I think, probably a little scary for some.

[00:10:54] H. Adam Holt: It's very true. I think that's a really great point, Derek. One of the things that, um one of my friends who used to work for me many years ago, one of the earlier partners in Asset-Map, he indicated, he used to say this phrase all the time, "Those advisors that are trying to compete with technology alone-" Will be replaced by robos at a fraction of the cost.

Steve Antill said that, and I thought that was really interesting because it kind of stuck with me, right? There were so many advisors saying, "I'm just gonna add this technology, and I'm gonna have this cool client portal, and I'm gonna have aggregation and Evolve, and I have all this great..." And we're like, "But where, where's the human part?"

Mm-hmm. Where's the part where you actually spend time with them every year? You're trying to basically robotize, charge them a high price to basically have a portal. Okay, cool. You're replaceable, buddy, and I think that's interesting. What do you think about this, right? Because we all talk about how much we need to invest in technology, but that can't be our differentiator.

[00:11:49] Derek Notman: No, it can't. It actually is the benchmark now. It's the bare minimum. You have to have tech. People expect that. So if your value add is technology, then you just commoditized yourself. That doesn't work. Now you're replaceable. So it's that human interaction. It's empathy. It's trust. Mm-hmm. An algorithm cannot empathize, plain and simple.

A human being who can empathize can leverage an algorithm, can leverage tech, and if you combine those two things with the human understanding and empathy, and now you're leveraging tech to make that better, like that's the magic. That's the sweet spot where beautiful things can happen. I think maybe 10 years ago, if you were the guy, girl who was like, "Hey, I've got all this tech," you could probably use that as part of your value add, right?

'Cause you were ahead of the curve, and not a lot of people were doing this. Mm-hmm. People will flock to you just like robo-advisors were that flash in the pan, but that's all gone now. Now that is an expectation at a minimum. And actually, that leads us into our next, this fundamental shift here, which I, I think you should talk a little more about this consumer-driven shift that we're having now.

[00:13:01] H. Adam Holt: Well, yeah, just to, to tag onto, I mean, what you're saying, you know, a second ago, i- in my office, if you went to my office 10 years ago, it was one conference room. That was my office. I was a big fan of the idea of a w- non-office office, and I... This is what I was supposed to do revenue producing-wise. I was just supposed to spend the entire day in meetings, not doing anything else that would normally require an office.

Conference room. You're in a meeting all day, dude. On my wall, I had a six-foot touchscreen. And it was awesome. And everybody came in to play with it all the time. But we're talking like-

[00:13:36] Derek Notman: I've seen pictures. I've seen pictures

[00:13:37] H. Adam Holt: of this. Oh, you have? That's- Yeah ... I think there's a video out there about this. It was like literally doing the weather show where John Madden approached the financial planning on the wall, and it was just so entertaining.

I think people were just blown away by their technology at the time. We also moved to remote 10 years ago- Mm-hmm ... more than 10 years ago, um, because it was just easier to facilitate. So people just thought we were just so far ahead tech-wise, and I think that probably gave us some panache- I'm sure ... some value, I think, in the early days.

We were just way ahead of everybody. Everybody was using paper-based... We were like, "Yeah, that's cute." Um, now everybody has a touch screen, maybe five of them in their house. Uh, right, their kids are walking around with a touch screen. The technology, as you can see, ad- advances, and you have to stay on top of it if you're gonna say that, "No, we're innovators.

We're tech- We're basically facilitating delivery of advice in a different way." This is really what adv- This is the, the kind of hope of what robo-advice will do in the marketplace, but we all know they're gonna grab margin from advisors who are not creating accessibility en- environments. They're not creating transparency for what you're managing and what does it mean to me.

I, I think it's a real interesting thing because for the past couple years we've seen an argument being made by financial advisors, "Well, robo doesn't do financial planning per se."

[00:14:56] Derek Notman: Mm-hmm.

[00:14:57] H. Adam Holt: Derek, what is financial planning? Is fi- financial planning to a lot of people is literally running a retirement analysis.

[00:15:04] Derek Notman: Yeah, they've almost tried to commoditize that, and that... Here's a public service announcement. That's not financial planning.

[00:15:11] H. Adam Holt: But- Wait, wait a minute. I don't understand. I, I have a financial planning tool, and that's what the financial planning tool does. Aren't I a financial planner if I've run you a retirement analysis of when you run out of money?

[00:15:20] Derek Notman: Nope, sorry. Nope. That, that's a hard stop, hard no on that one. No, there, there's a lot more to it than that. Sorry, I just, I can't agree with

[00:15:30] H. Adam Holt: that one, no. No, but do you believe, like, do you know how true this is for l- I, I have now- I know ... trained and you have too, worked with thousands of advisors who claim to be financial planners.

Now, I, I'm not saying this to be disparaging, right? This is awesome that you're doing cash flow analysis, but it is the next commodity to go. If you're trying a different... This is a table stake. You have to do it. It's what my, huh, past product manager used to say. He says, "This is a hygiene item. You don't leave the house- Mm-hmm

without brushing your teeth," right? You don't have... You don't do an analysis without doing a retirement analysis, and by the way, we used to do this in Excel, right? Remember this? We would build these awesome models in Excel, and now there's cool technology which can generate all that work for you. This is a commodity.

It's not a differentiator.

[00:16:11] Derek Notman: It's the bare minimum, and it's what the consumer's demanding and expecting now, so you better get on board with that and figure it out. Does that mean you have to learn more? Yeah, but- I think because of how consumers are purchasing products, like we've got this marketplace phenomenon happening, it's just reality.

So becoming the subject matter expert has become so much more important now. That includes financial planning, by the way. So this is extremely important, and that's where people will pay. People will pay for expert advice because you can't commoditize that and you can't commod- commoditize empathy and trust and understanding.

So this is where I think human advisors can actually win over robo-advisors, or the two can have a symbiotic relationship at a minimum.

[00:17:02] H. Adam Holt: Yeah. It's true. Well, I tend to teach, uh, and there's a, a model we teach called the four frames, which means that a financial professional has to look at somebody's life from the perspectives of a legal advisor, a tax advisor, an insurance advisor, and an investment advisor.

These frames or points of view are how you compete. And of course, one might argue even a psychologist, too, because we know there's behavioral- Oh, totally ... fi- financing here.

[00:17:26] Derek Notman: Oh,

[00:17:27] H. Adam Holt: boy, do I have

[00:17:27] Derek Notman: stories.

[00:17:28] H. Adam Holt: How many times, right? I c- yeah. Ugh. Exactly. We probably way, know way too much, right? I was asking- Way ... how many dollars, not how many hearts, okay?

But that really, that motivates, right? Why, what people do and why they do it. But I, I think the point o- of that is to, just to consider that, and that's a great takeaway When you look at somebody's financial life and their, the decisions they're making, that doesn't mean you have to be a practicing, um, attorney or a, a tax professional, or the other professionals.

The, the key is can you start bringing ideas to the table? I think we're about to see this idea of the rebirth of a proactive advisor. I've been talking about it a lot recently. It's time for us, as humans, to reach out to our human clients and point out the areas they need help in without being asked. I mean, Netflix didn't ask me if I wanted to watch a show, but they have absolute intention of telling me, "Hey, listen, other people like you watch this show."

[00:18:18] Derek Notman: Exactly. Thank

[00:18:18] H. Adam Holt: you, Netflix. They know enough about me to do that. We should be doing that to the humans.

[00:18:23] Derek Notman: Well, of course. Any, quote, unquote, "advisor" that has more than, you know, 10 clients can say, "Well, I'm learning some things here. This is what's going on. I should probably call Johnny up and sit, tell him, like, 'Hey, we, we should probably consider it.'"

This isn't plug and play advice where everyone gets the same widget, but there are a lot of similarities when it comes to planning.

[00:18:42] H. Adam Holt: Mm-hmm.

[00:18:42] Derek Notman: So I think you're spot on with that. Well, isn't it that's how human advisors win over robo-advisors- That's true ... all day long. That is true. 'Cause a roma- a robo-advisor can't do that.

[00:18:51] H. Adam Holt: We have seen tech, and I know, honestly, we're building some amazing tech that we're gonna release this summer that will, from an algorithm, will be able to tell a client where their hazards are and what they should focus on. That's amazing. If we can do that today and tell the advisor, it's not far away before t- that technology's gonna be able to tell the client directly.

And then they're gonna be able to solve the problem now by hitting a button that says, "Buy it now." So I think the, the conclusion of this is the consumer has basically, and we all know this because we are consumers of technology and products in lots of other ways, you mentioned your Amazon experience, we're in the same boat where we get more boxes delivered than, you know-

[00:19:28] Derek Notman: Every day.

[00:19:29] H. Adam Holt: I don't know what... I feel like our recycle bin is actually bigger than our trash bin, which, like, maybe that's good, I'm not exactly sure right now. But I feel sort of good about that environmentally, but maybe not. Our kids will yell at us later. I think the interesting thing about this is that the consumers don't have attention span.

They want convenience. They want it delivered. They want it mass customized. They want it in front of them. Think about, as an advisor, how you're delivering on the consumer expectation, where your competition is Amazon, Netflix, Fang, uh, stocks, and so forth. I mean, the, these guys are setting the standard, and we're all following and chasing that standard in the delivery of technology services.

How are you gonna basically make sure that you create a financial advisory experience that s- that basically exceeds this, can go beyond what the capacity of a technology is, at least for now?

[00:20:17] Derek Notman: Right. Who knows what the future will hold, but I think the sh- the short-term future is just that. Like, look how many people use Amazon and everything else online that we order.

They want that convenience, and they're doing it from a place that has a strong digital reputation, that does have transparency. So we know that model works. We know robo-advice- In the way that it first came out doesn't work, actually work that well, but this new human element that we're talking about, which actually isn't new at all, it's just being facilitated differently.

Mm-hmm. This is a different medium now. You have to get in front of this as an advisor. Well, you don't have to do anything, but I, I would argue that if you don't, you're gonna be playing catch-up and eventually be just kicked out of the game.

[00:21:00] H. Adam Holt: It's true. Actually, r- that reminds me of something that, uh, that Joe Duran had written, uh, if you kn- follow Joe from United Capital and now Goldman Sachs Private Wealth Management, I believe it is.

He said something once that really just hit home for me, and he said it actually I think back in 2016, if I recall this article right. He said that there's, there are two distinctions, two variables when you think about making very difficult decisions, and I hope to paraphrase this correctly. He said, when there is a high cost of being wrong- And there's high complexity.

People tend to want another human to help them make a decision, and I think we are really sh- sailing, and this is kind of the culmination of all this, that financial services is all about helping people make financial decisions.

[00:21:46] Derek Notman: Mm-hmm.

[00:21:46] H. Adam Holt: If it's easy and there's low complexity, it's simple, and there's not a high cost of being wrong, uh, you can bet that the robo technology's gonna take this business, right?

What is that? It's gonna be term life insurance, banking, investing, direct investing, asset allocation models, target investing. Easy. Low cost of being wrong.

[00:22:05] Derek Notman: Totally.

[00:22:05] H. Adam Holt: Very simple. I can execute that. I think it's gonna push the financial advisors to move into the higher end wealth management space, estate planning, the complex business succession, retirement distribution planning.

We all know it's easy to get to retirement as opposed to actually how to make sure the distribution lasts forever. Right. That's actually a harder job. I don't know if you've dealt with retirees- Oh, yeah ... especially in low interest rate environments. So I think we're gonna really say if you're gonna tr- try to focus on an area, make sure you're getting skilled in this area, 'cause it's gonna be harder for technology to compete directly in this stuff when there's so many working variables.

Family members, kids, different- Exactly ... legal situations, separate marriages. There's just like, you know. That's gonna be interesting.

[00:22:49] Derek Notman: An algorithm can't understand or plan around those because they're infinite, right? Every situation is different. Although maybe sometimes just slightly, it's still different.

Algorithms can't figure that out, at least that I'm aware of. Yeah. So that's where being that subject matter expert, that doesn't just have to be high net worth. I think obviously more complexity comes in that space, but even for just Middle America, there's still a lot of complexities there. And although some of it might be done for you, that family still is probably gonna say, "You know what?

I'd like to talk to an advisor once a year just to make sure I'm on track. Let's do a benchmark." Almost like going to your general practitioner. Like, I think I'm doing okay, I'm exercising, I'm taking my vitamins, I'm doing it all myself, but I'm gonna get a checkup just to make sure nothing's there that I don't know about.

[00:23:31] H. Adam Holt: Boy, that is so true. You know, and that kind of inspired me to rethink something, you know, that we've been hearing a lot about. It is true. There have been some major studies done. I know, um, uh, McKinsey did one in last year that was really valuable. But they did promote the idea that financial advice will be really relegated again to- Or we'll say human advice and/or teams might only be for the higher net worth.

I think you're right that it will be more accessible. There w- it's not, uh, we're not gonna lose this profession, okay? We're gonna- No ... it's gonna evolve like all things. It's gonna evolve. The record industry clearly evolved, and thought that CDs was gonna be the, the next thing. Uh-huh. And then oh, where's an MP3?

Now it's like, what and why do you need an MP3 player? You just get the cloud. I mean, that, that industry's changed drastically if you're following what I'm talking about. The financial advice, uh, industry or the financial distribution or product industry, whichever you're calling it, has been around for 100 years, pretty much in the same way.

It's one of the reasons why we were inspired to do this. The reason, uh, I mention that is because when you think about the consumer, the consumer has literally like a third-grade education in finance. The ocean is incredibly blue, right? There's an enormous amount of space. People do need basic help, they need complex help, and they need ultra complex.

Just because there are technology solutions in here that can help them, let's say, get a little bit more comfortable about their financial wherewithal, maybe do some banking or do some trading online, it doesn't mean that we can't, as humans, give them the confidence that they want, bringing our competence associated with our experience and our credentialing, and of course our own research and skills.

So I, I think that's really the key. So when the, in the question that we started with was, do we think, the two of us at least so far, do we think that robo versus human is really a battle? It's a depends statement. We do think that human advisors will win over robo-advisors. Yeah. But pay clear attention to this concept of advice versus distribution.

Robo-distribution of products and solutions will win over human distribution simply because the margins will be compressed to the point where it doesn't make sense, like other technologies, dis- disin- disintermediated industries, for a human to do that work. Technology will be faster, cheaper for basically shopping.

Okay? Shopping for the solution. Mm-hmm. The key is can we help people get to the right place of, do I even need a solution? And if I do, okay, now let's go shop on your behalf. Maybe that's not our monetization model anymore. I think that's the big debate, right?

[00:25:57] Derek Notman: It is the big debate, but I think it's probably gonna happen the way that you just explained it Is that distribution will change.

Hey, I meet with my advisor, we have comprehensive conversations and advice and a game plan, X, Y, Z recommendations and implementations are now at hand. I'm gonna go to my robo marketplace and go implement the things that I need, and I'm gonna completely cut out the eight middlemen that exist currently so I can get what I need at a much lower cost.

That's what tech does, right? That's what tech does, and it has to be coupled with that human advisor.

[00:26:32] H. Adam Holt: That's true. And for, for most of you thinking, well, okay, my entire business is structured around the delivery of solutions, and I do lead with advice, and I act in my client's best interest, and we know that you're out there because that's us in many ways, right?

That we've been part of the roles and lots of friends in this role, and that's a majority of the marketplace, by the way. But if service is where the humans win, Derek, then digital reputation Is gonna be super important, right? Because if you think about it, if we take out the commoditization of actually implementation of product, my performance and my investments is no different than yours.

I can't argue that my fees are different. The solutions I have access to as an insurance person to implement are the same as everybody else. It's just why am I a better realtor than you, okay?

[00:27:18] Derek Notman: Yeah.

[00:27:19] H. Adam Holt: It's the same house, same market, same commission structure. I mean, everything will come down to digital reputation because when you think about it, when humans want to go validate that they're making a decision, they're putting that weight on another human advisor to help them make a good decision, they're gonna go look for validation.

And guess where they're gonna look? They're gonna go on Google. They're gonna go where it's easy. They're gonna go on LinkedIn. They're gonna try to read reviews on you. There you go. So we do know that we think it's gonna happen here is that the humans are gonna have to be more human than ever in order to differentiate-

from the robo component here.

[00:27:51] Derek Notman: I love it. Yeah.

[00:27:51] H. Adam Holt: Doesn't that right? So we have to do the things that humans do, not the things- And do them better ... that technology does. Oh, let me send you an automated email. Let me send you- No ... an automated... No, I'm gonna actually send you a real letter, okay? Yeah. I'm gonna actually pick up the phone and call you.

I'm gonna actually pay attention to your family. I'm gonna become this, and, and I'm gonna get a reputation that's digital and, and lives forever. Right.

[00:28:15] Derek Notman: But what's funny about it is that we are using tech to enhance that human element, and that's what's so brilliant and, and amazing. It's just like an advisor using a marketplace for distribution.

It's the same thing. So we're gonna, we're gonna push forward here, folks, but I think what you need to walk away with is that you need to leverage the tech and your digital reputation to really find that sweet spot as an advisor moving forward. If you don't have a digital reputation, that is a major red flag, and the consumer has more than enough choices.

They will move on to the next one.

[00:28:50] H. Adam Holt: Hmm. That's true. I guess there's probably only one exception to that, and that's if you really want to be an exclusive elite mystery because you think that's what your customers want, a very unique, non-accessible publicly super expert that's available to a hyper niche.

Yeah. That might be the one exception that I can think of to not having an outward reputation. In other words, you're not looking for business. You take referral only, and you don't... And you wanna kind of protect that, almost like the secret society. If you're not in the secret society, you better have a digital reputation 'cause people are gonna be looking for you.

[00:29:29] Derek Notman: Exactly. Exactly.

[00:29:30] H. Adam Holt: Even your existing clients, by the way, when they're not exactly happy. 'Cause remember, all of the entire business, we think that our clients are just, oh, they're happy with me as a financial advisor. They're not getting bombarded by every single marketing tool from Facebook to... for a better advisor who could do it better, cheaper, faster.

You're wrong. In fact, they have buddies that they're making on the golf course that also are in the space that are hitting them up Yeah, people look around and, and that's- It's true ... what tends to happen. I think we can't get stuck on our, on our laurels that people are always just happy because they've been with me for 10 years.

The... deliver value, okay? That's the point. Find a way to deliver value and make it human value, and if it's gonna be technology, make sure that it's not the technology that is differentiating you. It is an added value service because you're empathetic- Exactly ... to their needs, and it saves them time and/or energy and/or money.

[00:30:18] Derek Notman: Brilliant.

[00:30:19] H. Adam Holt: I wanted to, um, jump to this question, 'cause this question came in for you, and I, I think it's so... If you don't mind, I'm gonna ask you this question, Derek. Jump in. Because this came to Derek. It was a question from Jennifer in the States, United States, and she writes, uh, this: "Dear Derek, I've been recently questioning whether I'm going back to a corporate office after my success in working from home.

While it was a challenge making a space working with my family," we all can relate to that one-

[00:30:44] Derek Notman: Mm-hmm ... "

[00:30:44] H. Adam Holt: I have saved a bunch on overhead and commute. What tips- Yeah ... can you share for advisors who wanna grow but wants to stay virtual? Thank you." Thank you, thank you, Jennifer, for submitting that via, uh, LinkedIn.

What do you think?

[00:30:58] Derek Notman: There's so much to unpack here. I hear this a lot. What tips can I share? Well, there's so many things that have to be thought about, and heck, maybe that's just a whole nother episode where we unpack that a bit more. But I, I think it comes down to a couple key elements, and I would say two of those are your physical infrastructure and your digital infrastructure.

Without those, without infrastructure, it's impossible to really run a successful practice, regardless of location, actually. I mean, you were talking about your old brick-and-mortar office. You had that conference room infrastructure, right? That's what was a- allowed you to facilitate the meetings that you had.

So I think that's extremely important. I think it's the mindset. Our industry has been doing things a certain way forever. Although the pandemic was quite the whirlwind for everybody around the world, it did show us that we can do things different and better.

[00:31:50] Announcer: It,

[00:31:51] Derek Notman: it's interesting. So I, I ran a poll on LinkedIn about a month ago.

This was May of 2021. It was viewed around 20,000 times. Wow, which is not, that's not, not too bad for a LinkedIn post. It had 759 votes. So I mean, obviously this is a small sampling, but all, of all of those, and this whole pol- poll was about, or poll, was asking, "Hey, am I gonna go back to the office or not?

Like, what's my preference?" And we had a couple different options. One was I wanna go back full-time to my office setting. And keep in mind, the majority of my audience is financial advisors. Only 14% wanna go back to the office full time. The rest wanted to either be completely remote or hybrid of some sort like that, where they had some preferences and flexibility.

So it's very interesting that th- this question just, like, it's near and dear to my heart 'cause I've been virtual for a long time like you have, Adam, and it's something I love to talk about. But yeah, there were some growing pains, but obviously now we're seeing the benefits of going through that evolution, and it's clear that the industry doesn't want to go back to that office the way that they used to.

I think though as far as tips, I mean, you and I could talk all day long about different tips that you could use to really do this, but I think the ones I said earlier are probably a good start, but even those take some unpacking. And I could talk all day about this.

[00:33:05] H. Adam Holt: I know you can. It's a

[00:33:06] Derek Notman: great question.

[00:33:07] H. Adam Holt: I, yeah, we, we love this topic, mostly because it's hilarious how many people have discovered remote, and we've been just doing it for so long.

[00:33:15] Derek Notman: I know,

[00:33:16] H. Adam Holt: I know. Kind of like, "Hey, did you hear you could buy stocks online?" "Really? Wow, that's cool." No, that... Listen, I don't say that with disrespect. I say that because it's amazing how life puts a, a fire to get you to open your eyes, right?

Part of the reason why we're doing Rethink is because what a great opportunity to rethink why we're doing what we're doing. Mm-hmm. Its intentionality is really driver to, I, I think, specific purpose. This is another great question. I, I'm actually surprised how many people, because we're right in this kind of cusp of is everybody going back, is the, the masks are coming off and at this time of the world, it's the middle to end of '21.

I, it'll be really curious to go back to this episode a year from now and see what people chose to do. There are a good number of people that have said they must go back. I don't... I think the, the, the key to this, and we're gonna, I think we are gonna do our next episode on this specifically, so tune in for that.

The, the real question I would throw out here is, what really serves your identity of who you want to be and where you wanna spend your time? The probably the most amazing thing I've seen watching you, Derek, is the quality of life you've created as a result of disconnecting from a physical office, right?

You live where you want to live. You move your family around. Everybody's indoctrinated with this lifestyle of Dad works and Dad plays, and you've taken the freedom that this business affords you-

[00:34:40] Derek Notman: Mm-hmm ...

[00:34:40] H. Adam Holt: and used it from a time perspective to build a lifestyle that you want. And I think that this is...

Financial advice, we all know, has the capacity of creating a lifestyle of accessibility and compensation that is really unlike many other professions, especially one without inventory measures, so you don't physically need a space. If you can figure this out, it is incredibly freeing, and I would argue is probably a necessity going forward because your clients are going to want to be remote, too.

They're not coming into your office. So if you don't need a physical space, fundamentally you don't need one, or don't need the same size one, I think it's a real good question. Let's make sure that we do a session right on this, which I think will be very popular

[00:35:23] Derek Notman: Oh, it's gonna be... Yeah, it, it'll be fun. We can really, uh, rethink a lot of the preconceived notions of what it means to have a brick-and-mortar versus virtual office.

We don't need to dive into that. Here's a teaser for next, the next episode, folks, so make sure not to miss it.

[00:35:37] H. Adam Holt: Absolutely. Well, thank you, Jennifer. We'll be sure to send you a shirt, a Rethink shirt, T-shirt. Hopefully wear it with pride. Send us a photograph. Again, for those of you that want us to touch on certain topics, please take the opportunity to follow us on LinkedIn and send us a message in some manner with carrier pigeon or the technology, whatever you got at your access today, and make sure that we make this a community conversation.

Derek, fantastic to spend some time with you again.

[00:36:00] Derek Notman: Yeah. Awesome, my friend. Good, uh, good chat today. And everyone, thank you for listening. We're sending out positive vibes your way. And stay tuned for our next episode. Cheers, buddy. All right. All the best, my man.

[00:36:15] Announcer: Thank you for listening to Rethink, the Financial Advisor podcast with Holt and Knottman.

Be sure to subscribe now and join the ongoing conversation. The information covered and posted represents the views and opinions of the guest and does not necessarily represent the views or opinions of Asset-Map or Connectir. The content has been made available for informational and educational purposes only.