Welcome, everyone! Welcome to the 51st episode of the Financial Advisor Success Podcast!
My guest on today’s podcast is Dan Egan. Dan is the Director of Behavioral Finance and Investments at Betterment, the so-called “robo-advisor” that now manages more than $12 billion of assets under management for over 300,000 clients.
What’s fascinating about Dan, though, is not simply that he was an early employee and Director at Betterment as the company as grown, but specifically his role as the Director of Behavioral Finance at a robo-advisor. In a time when the primary criticism that financial advisors levy at robo-advisors is their supposed inability to help clients with their behavioral issues when it comes to investing.
In this episode, we talk in depth about the nature of the “robo-advisor” movement, why the reality is that Betterment and its ilk aren’t really in competition with financial advisors because they serve a different kind of consumer with different needs, how Betterment over the years has built an increasingly more robust goals-based financial planning process for its clients, and the challenges and opportunities that come with trying to deliver financial planning and investment advice at scale – in a world where Betterment serves more than 300,000 clients, while the typical advisory firm has no more than about 100 clients per advisor.
We also talk about what Betterment is doing specifically from the behavioral finance perspective, how Betterment is actually testing behavioral finance interventions to help their clients using a robust scientific process, the kinds of evidence-based insights they’re gleaning about how we can help clients better – including how the conventional wisdom of strategies like “proactively communicating with clients during times of market volatility” can actually backfire – and the ways that companies like Betterment may actually be better positioned to help clients with certain behavioral issues, because unlike most financial advisors Betterment doesn’t have to rely on third-party technology firms and instead can build its technology tools to nudge clients in the exact direction they need.
And be certain to listen to the end, as Dan discusses some of the insights he’s gleaned about where and how human advisors will continue to be superior to technology in some areas, even as technology makes other aspects of what advisory firms do less and less valuable and more automated for everyone.
So whether you have been contemplating offering your own robo-advisor solution, are interested in how you can better incorporate insights from behavioral finance into your practice, or are curious about the areas in which human advisors will continue to be superior to technology, I hope you enjoy this episode of the Financial Advisor Success podcast!
source https://www.kitces.com/blog/dan-egan-betterment-podcast-robo-advisor-evidence-based-behavioral-finance-research/?utm_source=rss&utm_medium=rss&utm_campaign=dan-egan-betterment-podcast-robo-advisor-evidence-based-behavioral-finance-research
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