A Narrative Battle: Robo Advisors vs. Traditional Asset Managers

Thursday, December 21 2017 Reinhard Cate Content Marketing Manager Categories:

Thanks to the power of artificial intelligence (AI), there is now a battle raging for investors’ wallets and minds. The growth and adoption of Robo advisors, the algorithm powered, intelligent, and cost effective digital asset managers that have put traditional, human asset managers on notice. This is a narrative battle, where companies are vying to get consumers to believe different things. Where there are deeper beliefs driving human behavior, regardless if they are about a product or an issue, there are always narrative battles.


At Protagonist, we use natural language processing, computational analytics, and artificial intelligence to power narrative analytics. This is a process where we can ingest big data sets from news, blogs, and social media and quantify the underlying beliefs in them. As we learn to understand the narratives present in content, it’s critical to diagnose narrative battles and develop strategic marketing and communications to address them. In this piece, we’ll take a look at some of the lessons and insights present in the narrative battle between Robo Advisors and traditional asset managers and how it is impacting business and buyer behavior across the financial service industry.


Narratives Favor Robo Advisors

We took at over 7500 pieces of news and blog content about Robo Advisors over the past year and found a largely positive group of narratives. Four positive narratives made up the majority of the content at 70%. The narratives were fueled by the belief that Robo Advisors were gaining popularity and could outpace traditional asset managers (Gaining Ground), and that access to big data made them superior (Harnessing Big Data). We saw that the technology powering them was part of a larger customer focused shift (Leveraging the Digital Transformation), and that they appealed to a new segment of investors thanks to their ease of use and cost effectiveness (Democratizing Investment).



One negative narrative, Simplistic Approach, captured 8% of the conversation. It made the case that Robo Advisors provide an investment approach and portfolios that are far too simple for today’s market, which requires dynamic, reactive, and customizable solutions. The narrative also expressed concern that with the market fluctuations over the last few years, or in a single down day could cause a Robo Advisor to make a bad call that a veteran human advisor would avoid.


Two neutral narratives took up the last 22% of the conversation, with Humans and Machinesexpressing the belief that savvy investors should use both traditional human asset managers as well as Robo Advisors, Crowded Market, argued that the choice of companies was crowded by both FinTech companies and traditional asset managers adopting the tech.


AI Hype, Robo Advisors as Heroes, and Volatility

An examination of these narratives over time reveals some interesting insight behind what drives them. First stories about the power of artificial intelligence technology helped drive a big spike in the positive narratives Gaining Ground and Leveraging the Digital Transformation. However, stories and content that framed Robo Advisor companies as heroes who were allowing large new groups of people to invest, also drove spikes in the conversation by boosting the narrative Democratizing Investment.


Narratives, both positive and negative about Robo Advisors were also driven by geo-political events. With drama in Washington and tensions on the rise on the Korean peninsula, beliefs about Robo Advisors focused on whether they could handle real market volatility and swings associated with outlier events. A surge in Simplistic Approach took the negative view, while a boost in Humans and Machines and Leveraging the Digital Transformation took neutral to positive views. An interesting trend overall showed a boost in the neutral narrative Humans and Machines, which grew well above its average narrative impact for over 5 months. This result is a sign of growth and emergence of the belief that investors think it’s smart to use both traditional human asset managers together with Robo Advisors.


Betterment Dominates the Beliefs

Betterment, one of the largest players in the space is one of the biggest influencers in beliefs about Robo Advisors. The narratives Gaining Ground and Leveraging the Digital Transformation both focus broadly on the growth of artificial intelligence technology and a belief that will Robo Advisors can outpace human financial advisors. In these two positive narratives, Betterment’s association is nearly double its next largest competitor Wealthfront (49% vs 27% in Gaining Ground and 17% vs. 7% in Leveraging the Digital Transformation). For traditional financial advisors looking to counter these beliefs, this result means that they need to directly counter the influence of Betterment if they want to counter the idea that Robo Advisors will outperform human advisors.



Thankfully for traditional financial advisors, Betterment also has the largest negative signature in the only negative narrative for Robo Advisors, Simplistic Approach. At 27%, this high association means that the company drives a significant portion of the belief that Robo Advisors are just not developed and complex enough to handle a volatile and ever-changing market, something human financial advisors are very accustomed to.


Understanding the new generation’s buying preferences is big business with millions at stake. Want to learn more about how to understand and leverage the narratives around Robo Advisors and traditional asset managers?


This high association is an opening for traditional financial advisors. They can try and associate Betterment with this negative narrative, countering two birds with one stone. While we didn’t do it in this specific analysis, segmenting this data further by audience type could yield some more interesting results. In a previous post we went over millennial investment beliefs and a powerful narrative in that data was the adoption and popularity of Robo Advisors within the selfie generation.


It’s possible to leverage influencers within the narrative data when crafting strategic communication from a deeper narrative strategy. Learn how via our BrightTalk webinar. The data reveals a consistent narrative battle for investors, one that is driven by, ideas about technology, geo-political events, and democratization. So regardless of your brand or industry, understanding the deeper beliefs, the potential narrative battles you’re involved in, and ultimately how to win them, is crucial to managing your brand’s public perception. And your buyer’s attention and loyalty.