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Hi, My Name is Hal. I Will Be Your Virtual Advisor.

by Mike Trapanese

Unlike the generations before it, Generation Y has grown up online. Gen Y-ers are comfortable with computers, readily mining highly-specialized information from the farthest corners of the internet. This familiarity with the electronic world has, to some extent, allowed Gen Y to replace personal interactions with digital ones. Consider sites like WebMD and eHarmony, and software like TurboTax and Quicken: users exchange information via a computer interface, which in turn renders advice and directs them toward relevant information. On the whole, Generation Y is almost as likely to turn to applications for advice as to seek professional, in-person guidance.

The implications of this shift are far-reaching for financial advisors. An advisor's primary function, as a fiduciary, is to determine a client's investment objectives and risk profile, and map them to appropriate investments. With research analysts playing an increasingly causal role in fund selection, however, the account construction process is becoming increasingly formulaic. Wirehouse advisors of the future may serve little purpose other than to interface with clients and assign their assets to discretionary platforms.

This is a service that investors of today are willing to pay for. Investment information is often cryptic and scattered across a multitude of locations, and advisors represent a liaison to this information. Furthermore, advisors know how to interpret it in the context of an individual investment strategy.

For investors of tomorrow, however, technologies like RDF promise to deliver the mutual fund lowdown with the click of a mouse. The so-called "Data Web" in the making is already painting a picture in which information scattered across the internet will be more easily accessible and cross-comparable through innovations in coding and language.

These functionalities will, over time, remove the need for a nuanced approach to gathering fund information. Especially with discretionary platform placements, it is reasonable to imagine a Web site interface replacing its advisor counterparts. The question is: How long will it be until Generation Y cuts out the middle man and replaces some portion of advisors with Virtual Advisor software?