May 7, 2020

Robo Advisors and the Investment Management Industry

By Mike Brown

The Future of Robo Advisors

Robo advisors are on the rise and they are winning in the investment management industry. When they made their appearance on the market, they were thought to be the thing that will most definitely steal the market from financial advisors and investors, which was true to a certain extent. It turns out that they actually benefit both traditional financial advisors and investors, and we will explore those benefits.

Friend or Foe

However, the general public awareness about robo advisors is still not that good, but it is growing at an incredible pace. It is assumed that they are going to change the world of investment and financial advising, and the way we perceive the market completely.

They have become quite a hit with wealthy investors, but are they here to stay? While the answer to this question is still unknown and it still remains to be seen what will happen with these investment platforms, so let’s look at what all the fuss is about.

What Are Robo Advisors?

robo-investor

Robo advisors are online platforms that use algorithms based on the modern portfolio theory to provide financial advice online and manage portfolios. They represent a brand new way of investing and they also offer asset allocation and goal setting for those who are just starting out. These automated investment services are an amazing investment tool for the market, and the greatest thing about them is their price.

They charge less than half the fees of a traditional financial advisor, which adds up to at least one per cent of the assets that are under management. Another great thing about robo advisors is that, apart from using modern technology, they also use traditional methods, such as the aforementioned modern portfolio theory, exchange traded funds, risk tolerance and many more.

Do They Really Benefit Financial Advisors and Investors?

The fact is that robo advisors don’t benefit each and every financial advisor and investor on the market. This is due to the fact that not all of them are good at their jobs. This is actually a good thing for the overall market, since only the most affluent advisors and investors will remain active and able to tackle finances with the help of robo advisors.

This is extremely important, because of the fact that customers want to speak to an actual person when they need financial advice, while they also want top-notch technology to protect their assets. That is the main reason behind the importance of robo advisors and their growing popularity.

Since only the best financial advisors and investors will remain on the market, they will be able to focus more on increasing their productivity and becoming more effective at completing all their tasks, which is definitely a great benefit for both them and the people they do business with.

The Popularity of Robo Advisors among Wealthy Investors

With their low price, more and more wealthy investors are beginning to try out robo advisors, resulting in a grand money-making business. Investors with pretty large portfolios are putting their money into the “hands” of these automated services, and the numbers just keep going up.

This huge success will most certainly make traditional financial advisors want to work harder on become better and smarter, thus becoming great assets for the overall market. Likewise, banks will start using robo advisors to complement their sales and aid their employees, thus helping their customers in a much more efficient way.

The race for success is coming. The rise of robo advisors and their improvement will lead to the improvement of every financial advisor and investor out there. Traditional brokerages, for Instance, are under a lot of pressure because of the cost of their services, since robo advisors charge much less.

They are going into survival mode, which will certainly result in them lowering the cost of the services they offer, that is, if they wish to stay in the money-making business. They will also most certainly have to implement robo advisors in their investment management process.

[easy-tweet tweet=”Jay Welker, the president of Wells Fargo’s private bank said: “We think of robo as serving multi-generational families”, which is absolutely true.” via=”no” hashtags=”#AI #Investing”]

Robo advisors show real promise and they are becoming more and more popular, not only among millennial’s and small investors, but also among wealthy investors. Robo advisors are the future of the world of investments, and they are becoming the next big thing on the market.

By Mike Brown

Mike Brown

Michael Brown is a Research Analyst at LendEDU, a personal finance company. Michael uses, develops, and analyzes data from a variety of sources to tell a story and identify trends in the personal finance space. A graduate of the University of Delaware, Michael enjoys attending major horse racing days, hiking with his dog, and reading about Ancient Roman history in his spare time.
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