Originally published in Advisor Perspectives, December 12, 2016

It’s time to refocus your efforts on establishing and solidifying an emotional connection with prospects and clients.

As an advisor you counsel your clients to be aware of confirmation bias and to avoid the temptation to favor information that confirms pre-existing beliefs. Yet, many of you suffer from the same bias. Here’s why:

You underestimate the impact of technology

There are many articles that support the view that technology will not impact the way you do business. For example, you don’t have to look far to read that:

• Robos are only suitable for the uninformed or those with modest assets.
• Technology that is one size doesn’t fit all.
• Robos won’t hold your hand during the next market correction

I don’t buy it.

The arguments trivializing the impact of robos are not persuasive. Robos can be suitable for knowledgeable investors who understand the impact of low costs on returns and the benefit of broad diversification.

But robos have portfolios for investors at all risk levels, and don’t shoehorn everyone into a “one size fits all” portfolio.

Investors are a lot more sophisticated than they were before the Great Recession. They understand long-term risk and return data. I find it ironic that advisors who pride themselves on guiding their clients into the right portfolio, after extensive discussions and disclosures about the historical highs and lows of that portfolio, are the most concerned about how their clients will respond to a market correction.

Investors today are better educated and more self-reliant. Don’t count on them placing much value on having you hold their hand.

You overestimate the value of your investing expertise

Investing has become a commodity. It’s unlikely, net of fees, you’ll be able to add value to your clients over what they could earn in one of Vanguard’s Target Retirement or LifeStrategy funds.

Advisors who place their clients in funds managed by Dimensional Fund Advisors may find this observation attributed to Weston Wellington, Vice President, of Dimensional, sobering. He was asked by White Coat Investor in July, 2013 “whether a disciplined, educated do-it-yourself investor should hire a DFA-authorized advisor just to get access to the funds.” His answer was “an emphatic no.”

The trend towards passive investing is a double-edged sword for index-based advisors. On the positive side, more investors have abandoned trying to “beat the market” and are using index funds.

On the negative side, using index funds is simple and straightforward. It’s easy to buy them directly from low cost-fund managers or to use one of the robo-advisors who offer them.

Your challenge is to quantify the value of your non-investing expertise.

Your efforts to differentiate yourself are misdirected

A recent article by Michael Kitces concluded that getting a PhD in financial planning is not a good way to differentiate yourself. I agree.

Prospects rarely make decisions based on the technical prowess of the advisor. In fact, I’ve received numerous reports from my coaching clients that they landed the business without any discussion of investing.

Kitces correctly notes (as I have previously) that “the key trait for financial planners in the future will be the one skill that our brains are not programmed to receive from a computer: empathy.” He also observes that there is “remarkably little in the way of ‘empathy training’” available.

You’re not going to be able to compete with the awesome growth of computing power. Within a relatively short time, investors will be able to obtain the same level of investing and financial planning expertise you currently offer, online, from a robo-advisor.

It’s time to refocus your efforts on establishing and solidifying an emotional connection with prospects and clients. If you don’t, the mantra that “robo-advisors will never replace human advisors” will not hold true for you.