There’s a lot of talk  about robo advising tools these days. “They are of great interest,” says Tim Rouse, executive director of the SPARK Institute. “These tools do offer a lower-cost alternative to the human adviser.”

But, will they replace the human element? “That’s the big question,” Rouse says. “I don’t know what the answer to that is.”

Rouse expects robo tools will be used as a supplement rather than a replacement. “Advisers will use these tools to broaden their book,” he says.

When it comes to the small-plan 401(k) market, traditional advisers “dominate that market,” says Mike Alfred, co-founder and CEO of BrightScope. It’s also the only space robo advisers have a chance of reaching, he says, which can’t be accomplished unless new entrants into the market have a plan for integrating human advisers into their business model.

Also see: Betterment enters 401(k) space

In recent years, digital platforms have been entering the 401(k) market — robo firm Betterment became the latest entrant when it announced last week its 401(k) offering for employers is set to launch in the first quarter of 2016. The influx of robo advisers isn’t likely to have a significant impact, Alfred says.

“We’re at the peak of the hype cycle,” he says. “There are plenty of low-cost providers. I don’t think a couple of new products coming into the market will make a difference.”

Success in the 401(k) space takes time, Alfred says. The sales cycle is slow, and gaining traction in the market is challenging — it takes a long time to build a brand such as T. Rowe Price or Fidelity, he says.

As such, Alfred suggests Betterment’s reason for entering the market is more about growth and less about the need in the small-plan market. “A lot of the motivation is internal,” he says.

Betterment CEO Jon Stein claims otherwise, according to Financial Planning, a SourceMedia publication. “We know that this will take time. We're not just building something and hoping that next year we'll dominate the space,” Stein says. “Just like we've done on the retail side, we're building for the long term.”

Also see: Full coverage of DOL fiduciary hearings

Another area to consider is the impact the Department of Labor’s proposed fiduciary rule will have on robo advisers. Evaluating these types of tools must be viewed with this perspective, says Jerry Kalish, president of National Benefit Services, Inc. “It can’t be just about cost,” he says.

The comment period for the DOL’s conflict of interest rule ends Sep. 24, 2015.

Individual advisers in the small-plan market must ensure that everyone they work with, including third-party administrators and platforms, are all on the same page, Kalish says. “Now more than ever, an adviser who wants to be in this space … is well served by working with a complementary group of strategic partners,” he says. 

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