Automated Robot Advisories:
Robo Advisors [e.g. Betterment, Wealthfront]: One-to-one communication between financial advisor and client was the defining feature of the relationship in the traditional wealth management and investment advisory. With lower fees, Robo Advisors use automation to select investments that meet client’s’ risk tolerance and growth goals. For less complex portfolios, algorithms can determine the appropriate level of risk in bringing investment services to an underserved market.
Robo Advisory companies globally are focusing on broadening the scope of robo advisory beyond simple portfolio rebalancing. As this area matures and diversifies into more sophisticated portfolio construction and other offerings, investment is expected to grow significantly. In the future, we will likely see a broadening focus of digital advice including a much more holistic view of the clients’ assets, income and liabilities; not just the assets under management for that given platform.
Robo Advisors are also expected to address investor behavioural issues by fostering adherence to sensible investment plan appropriate to one’s circumstances rather than chasing the last ‘hot’ sector.
While one of the leaders in the space is Betterment, a New York–based firm, Wealthfront is another firm that has more than $1 Bn under management under its proprietary algorithms. Old established players Vanguard and Charles Schwab launched Robo Advisers and now have more than $20 Bn under management. Other firms engaged in automated advisory services include Mint‐Bills, WiseBanyan, Bloom, FutureAdvisor, Personal Capital, and Motif Investing.
References:
https://www.accenture.com/_acnmedia/PDF-2/Accenture-Wealth-Management-Rise-of-Robo-Advice.pdf
https://fundersclub.com/blog/2016/11/30/your-money-in-20-years/