Ep 051: What Robo-Advisors Can Teach Human Advisors About Evidence-Based Behavioral Finance with Dan Egan
Financial Advisor Success
Michael Kitces
4.8 • 696 Ratings
🗓️ 19 December 2017
⏱️ 107 minutes
🧾️ Download transcript
Summary
Today we have a different kind of guest on the show, and he offers a unique perspective for more reasons than one. Not only is Dan Egan a representative of the so-called “robo-advisor” Betterment, but, ironically, he also serves as their Director of Behavioral Finance and Investments. Given that the primary criticism robo-advisors get is for their supposed inability to help clients with their behavioral issues when it comes to investing, Dan provides an interesting viewpoint that is also very informative.
In this episode, Dan shares the real picture of how things work for onboarding clients at businesses like Betterment, how his company tests behavioral finance interventions using a robust scientific process, and what we can all learn from their findings. Listen in to hear the insights they’ve gained, as well as advice that all advisors can apply to improve their own services.
For show notes and more visit: https://www.kitces.com/51
Transcript
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| 0:00.0 | Welcome to the Financial Advisor Success Podcast, where you go behind the scenes with |
| 0:07.2 | financial planner, speaker, and consultant Michael Kitsis to hear stories of how leading financial |
| 0:13.1 | advisors navigated the inevitable challenges that arise on the path to success and get |
| 0:18.2 | insight from leading industry consultants about how to break through to the |
| 0:22.1 | next level in your advisory business. And now here's your host, Michael Kitsis. Welcome, everyone. |
| 0:28.7 | Welcome to the 51st episode of the Financial Advisor Success podcast. My guest on today's podcast is |
| 0:34.7 | Dan Egan. Dan is the director of behavioral finance and investments at Better at Betterment, the so-called Robo Advisor that now manages more than $12 billion of assets under management for over 300,000 clients. |
| 0:47.2 | What's fascinating about Dan, though, is not simply that he was an early employee and director of Betterment as the company has grown over the past five years, |
| 0:58.8 | but specifically his role as the director of behavioral finance at a robo advisor. |
| 1:04.1 | In a time where the primary criticism that financial advisors typically levy at robo advisors is their supposed inability to help clients with their behavioral issues when it comes to |
| 1:08.8 | investing. In this episode, we talk in depth about the nature of the robo-advisor movement, |
| 1:14.2 | why the reality is that Betterman and its ilk aren't really in competition with financial advisors |
| 1:18.8 | in the first place because they serve a different kind of consumer with different needs. |
| 1:23.3 | How Betterment over the years has built an increasingly more robust goals-based financial planning |
| 1:27.4 | process for its clients, and the challenges and opportunities that come with trying to deliver |
| 1:31.6 | financial planning and investment advice at scale, in a world where Betterment serves more than |
| 1:36.2 | 300,000 clients while the typical advisory firm is no more than 100 clients per advisor. |
| 1:43.0 | We also talk about what Betterment is doing specifically from the behavioral finance perspective, |
| 1:47.4 | how Betterman actually tests behavioral finance interventions to help their clients using a |
| 1:52.4 | robust scientific process, the kinds of evidence-based insights they're gleaning about how we |
| 1:58.0 | can all help clients better, including how the conventional wisdom of |
| 2:01.7 | strategies like proactively communicate with clients during times of market volatility can actually |
... |
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