To wrap up our discussion of how to reach underserved markets, let’s talk about the growing role of robo-advisors in assisting with customer service, a topic I broached in my Sept. 15 blog post.

Over the last several years, the use of automation and digital techniques has gained significant attention in the wealth management industry. Robo-advisors (RAs)—automated investing services that provide everything from financial planning to portfolio management—are still only a small part of the picture, but insurers are well aware of their potential to improve sales and reduce costs—by about 70 percent for some services, according to Accenture estimates.

Still in the early stages of develop, RAs can perform basic account maintenance and reporting activities, open accounts, and transfer assets. However, human advisors aren’t going away; reassuring clients through difficult markets, persuading them to take action, and synthesizing different solutions are still strictly in the human realm. Rather than replacing humans, RAs can increasingly take over the onerous, day-to-day tasks that keep advisors from engaging in what they’re really good at: selling and consulting.

Life insurers can go several ways in using RAs: they can build their own, buy independent robo-advisory firms, or offer “white label” services or an industry solution under their own brand.

We see three main concerns for life insurers to address in adding robo-advisors:

Getting the offering right. Insurers need to keep at the forefront what kind of experience they want to offer the buyer by adding robo-advisors. They need to determine level of support offered, pricing of the offering, and ultimately, investment performance.

Changing the Distribution Dynamic: Strategies for increasing the value of distribution in life insurance
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Developing an effective distribution strategy. Robo-advisors have a great appeal for underserved markets like millennials because they can help younger clients who have fewer assets to manage. Firms need to determine whether to use their own brand for a robo-advisor offering, or to roll it out using a new brand.

Getting the sales force on board. Insurers need to determine the extent of the role robo-advisors will play in the client transaction. For example, if a customer wants to talk to a “real person,” should that be a financial advisor of a member of the RA product team?

As RAs become more sophisticated, it’s safe to say they will play a bigger role with life insurers looking to reach underserved markets, especially the large new market of millennials who want to accumulate wealth, but have limited options for investment management.

Does your firm have plans for RAs in the near or distant future? What approach are you taking to integrate them into your distribution system? Feel free to drop me a line and share what you’re doing!

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