Emma – Part 2

Amar Pandit , CFA , CFP

Amar Pandit

A respected entrepreneur with 25+ years of Experience, Amar Pandit is the Founder of several companies that are making a Happy difference in the lives of people. He is currently the Founder of Happyness Factory, a world-class online investment & goal-based financial planning platform through which he aims to help every Indian family save and invest wisely. He is very passionate about spreading financial literacy and is the author of 4 bestselling books (+ 2 more to release in 2020), 8 Sketch Books, Board Game and 700 + columns.

On March 1st, 2022, I wrote a post with the headline “Emma”. Many of you loved it as much as I enjoyed writing it.  However, I did not have Part 2 in mind. Call it Serendipity or whatever, I received an email on March 2nd evening with a post headlined, “Human Advice will always win: Reflections on the Wealthfront UBS Deal.

In case you are still wondering what has this headline got to do with my post “Emma”, let me share with you the concluding paragraph of Emma.

Coming back to Emma, paper is here to stay. So are you and the real professionals. Many of the Wealth-Techs will be sold or shut down. They don’t love this business or your clients like you do. They are here to make a quick buck, package and sell. Wealthfront, one of the biggest Robo advisors in the US (and the world), sold itself last month. For all its rants about technology replacing people (and how its technology only), guess who they sold the firm to. UBS. To People.

When I read the email I received, I couldn’t believe it. It was serendipity at its best. Thus, I decided to do a Part 2 on Emma, but essentially this post is about Aaron Klein’s reflections on the Wealthfront UBS Deal (published in financial-planning.com).

Aaron Klein, CEO of Riskalyze, writes, As CEOs, the pulse of industry events often requires more attention from us than we may admit. And whether those events pose an opportunity or a threat, they are certainly a time for us to take stock of what is before us.”

For me, one of those occasions happened in early 2015 when robo advisor Wealthfront declared they were going to make financial advisors obsolete.

Within weeks of that original declaration by Wealthfront, I found myself at one of our industry conferences with a video camera and microphone thrust in my face.

What did I think of Wealthfront, the columnist asked?

Wealthfront is just E-Trade with an expensive coat of paint, I responded, somewhat impulsively. Within an hour of that video going live, I had been blocked on Twitter by Wealthfront’s then-CEO, Adam Nash.

To set the context, E-Trade is one of the online trading platforms like many of the ones you see in India. Don’t be surprised to know that even E-Trade was bought over by Morgan Stanley.

Aaron further writes, “What fascinated me is how advisors kept thinking Adam (Wealthfront) was their new competitor when the truth was that Wealthfront wasn’t even close to being capable of competing with the value proposition a great financial advisor brings to the table.”

You cannot beat this or any competition by becoming like them. You have to beat them by delivering a value proposition that they can never deliver. The combination of a world class client experience along with your care, empathy, and skill is a combination that no robo will ever be able to beat.

Thus, we have created the world’s first integrated technology stack (across consumers and financial professionals – includes a world class practice management product) to help you truly differentiate with a superior client experience, and to unlevel the playing field even when compared with the deepest pocketed financial institutions.

Aaron adds, “So it was quite the day for me a few weeks ago when Wealthfront, under new CEO David Fortunato, announced it was selling to UBS. In doing so, it will become a small division of one of the oldest and most storied banks in the world, one whose powerful wealth management business is home to thousands of — human — financial advisors.

From my chair, Wealthfront now looks like a client acquisition machine for UBS’s wealth management business, with UBS set to use Wealthfront as a profitable way to develop and build relationships with early-stage investors in the hopes of converting many of them to UBS financial advice when they reach scale.

Ultimately, the deal represents a $1.6 billion dollar vote of confidence in the value of human advice. It’s also a cautionary tale for those who want to innovate at the intersection of clients and advice. When something is deeply complex and critically important, we want to work with a human whom we can trust. I wouldn’t pick a robo brain surgeon, either.”

I couldn’t agree more. Just like I wouldn’t pick a robo brain surgeon, I wouldn’t even fly a plane without a pilot and crew (even though we know that most of the flights are automated and fly on autopilot).

I have often repeated that, “Technology is simply an enabler in this profession and many others. The real power of technology comes from what it enables us to do for our clients.

Aaron sums up the post on a similar note.

Technology is at its best when it is empowering, not attempting to replace, our humanity. What is great about Zoom calls is the human communication that flows over them, not the bits and bytes that do the work. That’s why we’ve always believed great advisor technology fades into the background to let the brilliance of the advisor’s work shine through.

Advisors will be replaced by algorithms the same day that they replace therapists, counsellors, coaches, teachers, and friends. Let’s just say that day is a long, long way away.”