Will robots replace you?
It’s an ominous yet understandable question considering the rise in automation across seemingly every facet of life. Financial advisory is no exception. Your value comes from your unique knowledge and skillset — but does the proliferation of robo-advisors and autonomous software supplant that value?
We have plenty of precedents that can help us answer these questions, as many industries have already embraced automation and undergone radical transformations as a result.
Let’s examine a few of them and determine if the existential threat is real or if integration can actually create more jobs and improve the daily life of hardworking Americans — including financial advisors.
How Has Robotics Technology Impacted the Automotive Industry?
In the early 20th century, piecing together a vehicle from scratch was a laborious task that required extensive human oversight. Even when Henry Ford unveiled the first assembly line in 1913, which reduced car production time by 87%, it still took 1 hour and 33 minutes to build a single car — and, perhaps more importantly, the hands-on work of 140 people.
Naturally, car manufacturers were some of the earliest movers in the field of automation, it just took time for technology to catch up with demand.
The first industrial robot was released in 1954 — a mechanical arm by the name of Unimate. A mere seven years later, General Motors rolled out prototypes on its manufacturing floors for spot welding. The transition helped the automaker produce 110 cars per hour, twice the pace of any other plant at the time.
The competitive spirit of capitalism wasn’t suppressed for long, as other automakers followed suit shortly after. By the 1980s, billions of dollars had flowed into plant automation. Consequently, by 1995, there were roughly 370 robots for every 10,000 automotive production workers (a metric known as “robot density”).
After 25 years of continual innovation and increased adoption, robot density has ballooned to 1,300 as of 2020, making the automotive industry the unquestioned leader in robotics usage. More notably, automakers like Ford and GM can produce a dozen or so vehicles every minute with modern robotics equipment. (Eat your heart out, Henry Ford.)
This begs an all-important question: what has happened to human employment with the rise of robots?
At the end of 1995, there were 1.24 million employees within the broader automotive manufacturing industry, according to the Bureau of Labor Statistics. As of 2021, that number had shrunk to 984 thousand — a 21% decline. However, the 2008 financial crisis convolutes this picture. Compared to 2009, auto-production-related employment is actually up 51%.
Why? Because the automotive industry has progressed toward collaborative robots (“cobots”). As the name implies, these are smaller robots that work alongside human operators. Previously, industrial robots were big, expensive, and difficult to integrate into the infrastructure of a manufacturing plant. They needed to be sectioned off away from the human workers so that they could operate without hurting anyone. But these newer cobots are smaller and usually designed to do one job precisely and safely. In practice, one human worker can oversee several cobots performing different tasks, leading to an overall increase in productivity.
So, despite the increased investment in and adoption of robotics, the car manufacturing process still depends on human workers — now and likely going forward.
How Has Robotics Technology Impacted the Healthcare Industry?
The reasons for health care providers to embrace automation are clear — faster and more accurate diagnostics, improved quality of care, less human error, reduced medical costs, and, ultimately, healthier people.
And a key driver of automation in the medical field has been robot-assisted surgery (RAS).
Like the automotive industry, the usage of robots in healthcare dates back to last century. In 1985, surgeons used a robotic surgical arm (the PUMA 560) to assist with a neurosurgical biopsy — a delicate, non-laparoscopic procedure.
However, unlike the automotive industry, it took much longer for robotics to gain traction and widespread deployment given that surgery is often a matter of life and death. Fifteen years after the first documented use of RAS, the US Food and Drug Administration approved the da Vinci Surgery System — a minimally invasive, all-encompassing system of robotic surgical instruments and camera utensils — for general laparoscopic surgery use.
A recent Forbes article by Dr. Sai Balasubramanian aptly describes the Intuitive Surgical system:
“The concept is simple — a trained surgeon sits in a console near the patient and controls 3 or 4 robotic arms that performs the actual surgery. This is especially useful in minimally invasive surgeries that often require extremely intricate hand movements and range of motion.”
As you’d expect, RAS had high expectations and a short leash. But the results spoke for themselves: the efficacy rates of surgical procedures improved drastically with the helping hand of a robotic counterpart.
To give you an idea, one study assessed 82,784 distinct hospitalizations that required surgery across a four year period (2006 to 2009). The study determined that the average rate of adverse events across all surgical procedures was 8.3%.
Another study assessed a much broader subset of robotic-assisted surgeries from 2000 to 2013, which accounted for 1,745,000 procedures. The number of adverse events per procedure was less than 0.6%.
Despite the success, public reception of RAS over the last 20 years has been mixed, at best.
A 2005 survey found that 95% of patients would recommend RAS — but it was a small sample of only 20 people.
A 2014 survey of 747 respondents found that the majority people (72%) viewed RAS as an enhancement, but 55% of respondents reported a preference for conventional surgery over RAS.
Most recently, a 2020 survey of 1,087 respondents still mirrored this ambivalent theme. Only about a quarter of people were even aware of RAS. About 4 out of 10 people thought it was an improvement, but about half questioned its safety. And 30% feared malfunctions during procedures.
Although robotics in healthcare has a ways to go in terms of public promotion and education, one thing is clear: surgeons are still necessary. Much like the automotive industry, surgical procedures still require the expertise and direction of a human. If anything, these automation innovations augment the role of a surgeon — rather than threaten their existence.
Robotics in Financial Advising: a Threat or a Solution?
Automakers have produced millions of cars — at rapid paces — with the help of robotics. Surgeons have performed millions of surgeries — at higher efficacy rates — with the help of robotics. Can the same be said for financial advisors?
As a financial advisor, wealth management automation can be intimidating. Stock selection, portfolio rebalancing, tax-loss harvesting, and professional advice seem to be coming from computers and algorithms rather than from certified advisors.
However, those who embrace automation are more likely to grow alongside innovation rather than be ousted by it. As an advisor, you can complement your expertise and skillset by providing a new form of value via tools and technology, which could not only create a competitive advantage but also improve your client relationships.
A 2020 Broadridge survey of 254 financial advisors shows promising sentiment as advisors continue to adapt:
- 77% report losing business due to inadequate technology to interact with clients.
- More than half of Millennial and Gen X financial advisors have considered leaving their current firms for others with better technology.
- Over 80% want more automation tools to manage paperwork and keep up with compliance requirements so that they can spend more time with their clients.
Based on the learnings of industries before and current advisor sentiment, especially among younger financial advisors, the future seems bright for the integration of automation.
So, would you rely on automation?