Articles related to robo advisors, online wealth management. automated investment advisors, investment management, digital investment advisors.

Empirica presented robo advisory software at FinTech Connect Live in London

Empirica took part in the biggest FinTech Event in Europe with almost 2500 attendees from 44 countries and 145 exhibitors & partners, taking place in London this December (6th & 7th). FinTech Connect Live combined a large scale expo, with 180 experts speaking in 120 dedicated conferences focusing on different FinTech subsectors, like WealthTech, InsurTech or PayTech with strategic discussion based sessions, keynote presentations, product demos and interactive workshops.

fintech-connect-live-2016Empirica proudly presented own white label solutions like an intelligent Robo-Advisory Platform, Algorithmic Trading Engine and FinTech Software Framework as well as development services among both tech giants and brand new start ups with sophisticated niche product offerings. Anyone interested in speaking with Empirica about building the bespoke FinTech solution behind own service could meet our team at the stand. We shared experiences gained for over 6 years of developing solutions for financial institutions and FinTech companies, including robo-advisors. We ran many interesting conversations about new market trends and needs, specially in wealth management space. Our Robo-Advisory Platform received huge attention from asset managers and investment companies participating in the event.

Empirica presented also company showcase demo at the showcase theater. While presenting our experiences, CEO of Empirica illustrated the most important issues of building tailored FinTech software.

fintech-connect-live-2016-sDuring the conference there were many interesting presentations and panel discussions about future trends of robo advice and advancements in the fields of InvesTech and WealthTech and other FinTech sessions like: the future of banking, blockchain rising, opportunities and risks in the data economy in FinTech, crowdfunding & P2P lending.

Thank you to all the participants who visited us at our stand or watched our showcase demo presentation! 

Empirica Team

 

See our Robo Advisor Software:
 
See our Robo Advisor Software

Reasons for asset managers to implement robo advisor software

The disruptive changes introduced by FinTech companies bring threats but also show where the opportunities can be found. With the advent of automated wealth management solutions, the traditional wealth management industry is facing perhaps its most disruptive threat since low-cost online stock trading in the mid 1990’s.

Most of wealth management companies have now a prime opportunity to apply robo-advisory technology to respond on time to the growing expectations of existing and future investors (the Millennials) and to stay more cost-efficient and profitable even in lower fees environment.

Main reasons to implement robo-advisory platform:

  • To widen the market for clients whose assets are below minimum required now by traditional advising. Robo-advisors can offer the investors regular access to financial tools that have been reserved for high net worth investors. Automated advisory platforms allow the advisory firms to scale up operations and serve more clients of every size and type.
  • To stay profitable in lower fees environment. Automated advisory platforms allow advisory firms to remain profitable and be significantly more cost-efficient in their advice delivery and execution even if fees decline. Low fees are an undeniable advantage in the eyes of customers. Many investors are ready to opt out of human advisors in exchange for lower costs and access to advanced services offered only for wealthier customers so far.
  • To work with Millennial Investors – a largely untapped source of assets. Digital advice attracts millennial generations of customers in a natural way. The Millennials have two major characteristics: they are accustomed to the online life and they usually do not have sufficient knowledge about investing. According to Accenture, almost 40% of Millennials are interested in robo-advice and their predisposition is to “do-it-yourself-through-an-app”.
  • To address growing expectations on level of the service. Providing the investors with real time information on their assets in engaging way saves time and is more convenient for him.
  • To attract investors by providing users portfolio aligned with their life goals instead of products of the advisor. Robo-advisory platforms give the visualization of balance projection and show the investor dependencies between the answers from the onboarding questionnaire, risk profile, proposed investment strategy and long term financial goals.
  • To benefit as a manager from behavioral analysis of the customer activities in the system to help them better deal with emotional aspects of investing.
  • To aim for transparency, especially when presenting the robo-advisor’s pricing , product and process information.

See our Robo Advisor Software:

See our Robo Advisor Software

TOP trends and challenges in wealth management

Robo-Advice is not about tomorrow anymore. It’s about today.
A robo advisor (robo-adviser) is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners. Robo-advisors are typically low-cost, have low account minimums, and attract younger investors who are more comfortable doing things online.
The idea made sense to many, and robo-advisors quickly gained market traction. Full-service, high-value-added, person-to-person activity isn’t for everybody. There’s generations of tomorrow’s investors coming up today who are more attracted to something less person-to-person and more technologically enabled.

The rapid rise of Robo-Advisors
Robo-Advice is changing the landscape of global wealth management. Historically, investment management was the purview of the wealthy. With robo-advisors flooding the investment markets offering low-fee, diversified professional management, the investing landscape is evolving.

The number of robo-advisors is growing rapidly. New consumer brands are emerging in the digital wealth management industry such as Betterment, Wealthfront and Personal Capital.

In its report BI Intelligence forecasts that robo-advisors will manage around $8 trillion of total global assets under management (AUM) by 2020.

forecast-global-aum

TOP trends and challenges in wealth management for next years

  1. Robo-advisors disrupt the wealth management industry. In the near future, advisors who wait for transition into robo-advisor will lose. Investors will migrate towards those lower-fee providers with technology platforms.
  2. We observe the strong influence of technology on the entire investing environment. Many investors trust technology and expect 24/7 access and reporting.
  3. The competition increase rapidly. New consumer brands of pure robo-advisors appear in the digital wealth management industry, while traditional financial advisors go robo as well.
  4. New regulations are directly impacting the financial advisory industry and driving companies to offer robo services as a way to meet the requirements.
  5. Investors increase pressure to lower fees. Robo-Advisors serve a wider range of customers and allow to stay profitable in lower fees environment.
  6. Artificial Intelligence enters the robo-advisory industry and could be the strongest competitive advantage. Robo-Advisors soon will offer more diversified investment products.

See our Robo Advisor Software:

See our Robo Advisor Software

About Robo Advisors at Sibos 2016

There was an interesting panel discussion at Sibos 2016 in Geneva with Silvan Schumacher, CEO of Swanest, Michael Mellinghoff foundder of Techfluence, Paolo Sironi author of Fintech Innovation (good read, besides, I am in the middle).
Short summary of main points:
  • advantages of robo – real time information on how my portfolio is doing and what I should do next
  • what drives money to the fund – absolute performance? No Marketing and User Experience
  • what robo changes is putting users portfolios in the center that are allingned with goals of the customer, it’s not about products anymore
  • many people leave asset managers not beacouse of poor performance but because of poor service
  • greatest contributor to alpha is cost reduciton
  • there are currently over 50 robo advisors in Europe, best have 100mio AUM
  • there are 150 robo advisors in the world
  • 80% of actively managed funds do not beat the benchmark, they should not be in the market

Interestingly, no one was brave enough to give sure anwser how digital asset management would like in 2025. No suprise as things are happening so fast.

 

See our Robo Advisor Software:
 
See our Robo Advisor Software

How traditional asset managers GO ROBO. Omnichannel advice and hybrid robos.

As the robo-advice industry grows it is attracting the attention of traditional asset management firms. These companies want to offer what their clients need — easy money management — while at the exact same time attract more funds to manage. Today they may be losing assets to the startup robo-advisor firms. Last year, Fidelity Investments, Charles Schwab Corp. and The Vanguard Group have either created their own digital services unit or partnered with an existing robo business. We are sure the other large firms will join the trend.

After the great success of robo advisors launch by Ameritrade, Vanguard or Charles Schwab the main question for traditional financial advisors is not if to invest in new robo-technology but how to bridge the gap.

robo-advisors-chart

Traditional financial advisors decide on hybrid model

Following in the footsteps of the stand-alone digital robo-adviser is a hybrid model, combining automated and traditional human services. The model offers a live company-employed financial advisor in combination with online automated services in areas such as asset allocation and rebalancing.

Hybrid Robos = Combining Human and Automated Wealth Advice

The report by My Private Banking Research projects a robust future for the hybrid model of robo-advisor. The research implies that the hybrid models will grow to $3.7 trillion assets world-wide by 2020 and $16.3 trillion by 2025, 10% of all investable worldwide assets.

robo_advisor_digitalization2

The main expectation for robo-advisors is to utilize more human-like interfaces and features, and for human advisors to adopt more robo-advisor-like features.

See our Robo Advisor Software:

See our Robo Advisor Software

How technology influences asset and wealth management

Future growth in assets under management (AUM) seems to be closely linked to digital strategy, as new generations of investors adopt different ways of investing. This calls for a rethink of which strategies can best capture the next generation of customers and compete against players who offer new investment platforms based on advanced robo-technology. Digital distribution is therefore expected to disrupt the traditional distribution landscape.
technology-influences

What does it mean for advisors today?

The next few years will be challenging for CEOs of wealth management companies. The top challenges include starting the digital transformation journey, which has an influence to:

  • The Grow of AUM
  • Cost Management
  • Regulatory Changes Navigating
  • Adapting to disruptive innovations in the business environment
  • Enhancement of customer satisfaction and engagement

Automated advisory platform allows firms and advisors to be significantly more cost-efficient in their advice delivery and execution, helping maintain profits even if fee income declines. These platforms also allow to scale up operations and serve more clients of every size and type.

Technology aids transparency and trust. When all operations are running through the automated advisory platform, it is easy to report to the client exactly what is happening, and why. Similarly, periodic reporting—quarterly, yearly or as often as the client wants—can be easily automated as well. The best automated platforms will record each interaction, as well as any client feedback, both for regulatory purposes and to enhance future interactions.
&nbsp

See our Robo Advisor Software:

See our Robo Advisor Software

Who is moving FinTech forward in continental Europe? Thoughts after FinTech Forum on Tour.

By Michal Rozanski, CEO at Empirica.

In the very centre of Canary Wharf, London’s financial district, in a brand new EY building, a very interesting FinTech conference took place – FinTech Forum on Tour. The invitation-only conference targeted the most interesting startups from the investment area (InvestTech) from mainland Europe. The event had representative stakeholders from the entire financial ecosystem. As Efi Pylarinou noted – the regulator, the incumbents, the insurgents, and investors, were all represented.

 

Empirica was invited to present its flagship product – Algorithmic Trading Platform, which is a tool professional investors use for building, testing and executing of algorithmic strategies. However, it was amazing to see what is happening in other areas of the investment industry. There were a lot of interesting presentations of companies transforming the FinTech industry in the areas of asset and wealth management, social trading and analytics.

 

The conference was opened with a keynote speech by Anna Wallace from FCA. Anna talked about the mission of FCA’s Innovation Hub; that is to promote innovation and competition in the financial technology field and to ensure that rules and regulations are respected. Whilst listening to Anna it became clear to me what the real advantage of London holds in the race to become the global FinTech capital – London has Wall Street, Silicon Valley and the Government in one place – and what’s most important, they cooperate trying to push things forward in one direction.

 

FinTech Forum on Tour

 

Robo-advisory

A short look at the companies presenting themselves at the event leads to the conclusion that the hottest sector of FinTech right now is robo-advisory. It’s so hot, that one of the panellists noted it’s getting harder and harder to differentiate for robo-advisory startups. On FinTech on Tour this sector was represented by AdviseOnly from Italy, In2experience,  Niiio, Vaamo and Fincite – all from Germany. Ralf Heim from Fincite presented an interesting toolkit ‘algo as a service’ and white label robo-advisory solutions. Marko Modsching from niiio revealed the motivation of retail customers, that “they do not want to be rich, they do not want to be poor”. Scalable Capital stressed the role of risk management in its offering of robo advisory services.

 

Social analysis/Sentiment/ Big Data

The social or sentiment analysis area, keeps growing and gains traction. Every day there’s more data and more trust in the results of backtesting as that data builds up over the years. The social media space is gaining ground. Investment funds as well as FinTech startups are finding new ways to use sentiment data for trading. And, it’s inseparably related with the analysis of huge amounts of data, so technically the systems behind it? are not trivial.

Anders Bally gave an interesting presentation about how to deal with sentiment data and showed  how his company Sentifi is identifying and ranking financial market influencers in social channels, and what they discuss.

Sentitrade showed its sentiment engine for opinion mining that is using proprietary sentiment indicator and trend reversal signals. Sentitrade is concentrated on German-speaking markets.

 

Asset management

From the area of asset management an interesting pitch was given by Cashboard, offering alternative asset classes and preparing now for a  huge TV marketing campaign . StockPluse showed how to combine information derived from social networks and base investment decisions on the overall sentiment. United Signals allows for social investing by making it possible to trade by copying transactions of chosen trading gurus with a proven track record, all in an automated way. And, finally BondIT, an Israeli company, presented tools for fixed income portfolio construction, optimization and rebalancing with use of algorithms.

 

Bitcoin and Blockchain

An interesting remark was given   by one of the panelist: ‘we have nearly scratched the surface for what blockchain technology can be applied to in financial industry’. Looking at the latest news reports that are saying that big financial institutions are heavily investing in blockchain startups and their own research in this field, there is definitely something in it.

A company from this sector of FinTech – Crypto Facilities, represented by its CEO Timo Schaefer, showed  the functionalities of its bitcoin derivatives trading platform.

 

Other fields

Hervé Bonazzi, CEO of Scaled Risk, presented its technologically advanced Big Data platform for financial institutions for risk management, compliance, analytics and fraud detection. Using Hadoop under the hood and low latency processing. Ambitious as it sounds.

Analysis of financial data for company  valuations, Valutico presented a tool that’s using big data, AI and swarm intelligence. Dorothee Fuhrmann from Prophis Technologies (UK) presented a generic tool for financial institutions to derive value and insights from data, interestingly describing indirect exposures and a hidden transmission mechanism.

Stephen Dubois showed  what Xignite (US) has to offer to financial institutions and other FinTech startups in the area of real-time and historical data that is stored in the cloud and accessible by proprietary API.

 Qumram, in an energetic presentation delivered by Mathias Wegmueller, described technology for recording online sessions on web, mobile and social channels, allowing for the analysis of user behaviour and strengthening internal security policy.

 

Conclusion

London is the place to be for FinTech startups. No city in Europe gives such possibilities. Tax deductions for investors. Direct help from the UK regulator FCA. Great choice of incubators and bootcamps for startups. No place gives such a kick. Maybe Silicon Valley is the best place for finding investor for a startup, maybe the Wall Street is the centre of the financial world, but London is the place that combines both the tech and the finance. It has a real chance of becoming the FinTech capital of the world.

 

About organizators

The people responsible for creating both a great and professional atmosphere at the event were Samarth Shekhar and Michael Mellinghoff. Michael was a great mentor of mine who transformed my pitch from a long and quite boring list of functionalities of our product to something that was bearable for the audience. Michael let me thank you once more for the time and energy you have devoted to Empirica’s pitch!

 

And because the FinTech scene in our region is not well organized yet, I sincerely advise all FinTech startups from Central and Eastern Europe to attend cyclic events of FinTech Forum in Frankfurt organized by Techfluence professionals!

 
Read about our Lessons learned from FinTech software projects.

 

 

FinTech Companies

 

 

 

FinTech. Lessons learned from over 5 years of financial technology software projects.

By Michal Rozanski, CEO at Empirica.

 

Reading news about fintech we regularly see the big money inflow to new companies with a lot of potentially breakthrough ideas. But aside from the hype from the business side, there are sophisticated technical projects going on underneath. And for new fintech ideas to be successful, these projects have to end with the delivery of great software systems that scale and last. Because we have been building these kind of systems for the fintech area for over 5 years we want to share a bit of our experience.

 

fintech empirica

 

“Software is eating the world”. I believe these words by Marc Andreessen. And now the time has come for finance, as technology is transforming every corner of the financial sector. Algorithmic trading, which is our speciality, is a great example. Other examples include lending, payments, personal finance, crowdfunding, consumer banking and retail investments. Every part of the finance industry is experiencing rapid changes triggered by companies that propose new services with heavy use of software.
The best evidence that something is happening somewhere is to see where the money goes. Investments in fintech companies globally grew to $12 billion last year, which is a three times increase comparing to 2013, and five times during the last five years, according to the research reports by CBInsights.

If fintech relies on software, and there is so much money flowing into fintech projects, what should be looked for when making a fintech software project? Our outsourcing software projects for the fintech industry as well as building our own algorithmic trading platform has taught us a lot. Now we want to share our lessons learned from these projects.

 

1. The process – be agile.

Agile methodology is the essence of how software projects should be made. Short iterations. Frequent deliveries. Fast and constant feedback from users. Having a working product from early iterations, gives you the best understanding of where you are now, and where you should go.
It doesn’t matter if you outsource the team or build everything in-house; if your team is local or remote. Agile methodologies like Scrum or Kanban will help you build better software, lower the overall risk of the project and will help you show the business value sooner.

 

2. The team – hire the best.

A few words about productivity in software industry. The citation is from my favourite article by Robert Smallshire ‘Predictive Models of Development Teams and the Systems They Build’ : ‘… we know that on a small 10 000 line code base, the least productive developer will produce about 2000 lines of debugged and working code in a year, the most productive developer will produce about 29 000 lines of code in a year, and the typical (or average) developer will produce about 3200 lines of code in a year. Notice that the distribution is highly skewed toward the low productivity end, and the multiple between the typical and most productive developers corresponds to the fabled 10x programmer.’.
I don’t care what people say about lines of code as a metric of productivity. That’s only used here for illustration.
The skills of the people may not be that important when you are building relatively simple portals with some basic backend functionality. Or mobile apps. But if your business relies on sophisticated software for financial transactions processing, then the technical skills of those who build it make all the difference.

And this is the answer to the unasked question why we in Empirica are hiring only best developers.

We the tech founders tend to forget how important it is to have not only best developers but also the best specialists in the area which we want to market our product. If you are building an algo trading platform, you need quants. If you are building banking omnichannel system, you need bankers. Besides, especially in B2B world, you need someone who will speak to your customers in their language. Otherwise, your sales will suck.
And finally, unless you hire a subcontractor experienced in your industry, your developers will not understand the nuances of your area of finance.

 

3. The product – outsource or build in-house?

If you are seriously considering building a new team in-house, please read the points about performance and quality, and ask yourself the question – ‘Can I hire people who are able to build systems on required performance and stability levels?’. And these auxiliary questions – can you hire developers who really understand multithreading? Are you able to really check their abilities, hire them, and keep them with you? If yes, then you have a chance. If not, better go outsource.
And when deciding on outsourcing – do not outsource just to any IT company hoping they will take care. Find a company that makes systems similar to what you intend to build. Similar not only from a technical side but also from a business side.
Can outsourcing be made remotely without an unnecessary threat to the project? It depends on a few variables, but yes. Firstly, the skills mentioned above are crucial; not the place where people sleep. Secondly, there are many tools to help you make remote work as smooth as local work. Slack, trello, github, daily standups on Skype. Use it. Thirdly, find a team with proven experience in remote agile projects. And finally – the product owner will be the most important position for you to cover internally.

And one remark about a hidden cost of in-house development, inseparably related to the IT industry – staff turnover costs. Depending on the source of research, turnover rates for software developers are estimated at 25% to even 38%. That means that when constructing your in-house team, every fourth or even every third developer will not be with you in a year from now. Finding a good developer – takes months. Teaching a new developer and getting up to speed – another few months. When deciding on outsourcing, you are also outsourcing the cost and stress of staff turnover.

 

4. System’s performance.

For many fintech areas system’s performance is crucial. Not for all, but when it is important, it is really important. If you are building a lending portal, performance isn’t as crucial. Your customers are happy if they get a loan in a few days or weeks, so it doesn’t matter if their application is processed in 2 seconds or in 2 minutes. If you are building an algo trading operations or payments processing service, you measure time in milliseconds at best, but maybe even in nanoseconds. And then systems performance becomes a key input to the product map.
95% of developers don’t know how to program with performance in mind, because 95% of software projects don’t require these skills. Skills of thinking where bytes of memory go, when they will be cleaned up, which structure is more efficient for this kind of operation on this type of object. Or the nightmare of IT students – multithreading. I can count on my hands as to how many people I know who truly understand this topic.

 

5. Stability, quality and level of service.

Finance is all about the trust. And software in fintech usually processes financial transactions in someway.
Technology may change. Access channels may change. You may not have the word ‘bank’ in your company name, but you must have its level of service. No one in the world would allow someone to play with their money. Allowing the risk of technical failure may put you out of business. You don’t want to spare on technology. In the fintech sector there is no room for error.

You don’t achieve quality by putting 3 testers behind each developer. You achieve quality with processes of product development. And that’s what the next point is about.

 

6. The Dev Ops

The core idea behind DevOps is that the team is responsible for all the processes behind the development and continuous integration of the product. And it’s clear that agile processes and good development practices need frequent integrations. Non-functional requirements (stability and performance) need a lot of testing. All of this is an extra burden, requiring frequent builds and a lot of deployments on development and test machines. On top of that there are many functional requirements that need to be fulfilled and once built, kept tested and running.

On many larger projects the team is split into developers, testers, release managers and system administrators working in separate rooms. From a process perspective this is an unnecessary overhead. The good news is that this is more the bank’s way of doing business, rarely the fintech way. This separation of roles creates an artificial border when functionalities are complete from the developers’ point of view and when they are really done – tested, integrated, released, stable, ready for production. By putting all responsibilities in the hands of the project team you can achieve similar reliability and availability, with a faster time to the market. The team also communicates better and can focus its energy on the core business, rather than administration and firefighting.

There is a lot of savings in time and cost in automation. And there are a lot of things that can be automated. Our DevOps processes have matured with our product, and now they are our most precious assets.

 

7. The technology.

The range of technologies applied for fintech software projects can be as wide as for any other industry. What technology makes best fit for the project depends, well, on the project. Some projects are really simple such as mobile or web application without complicated backend logic behind the system. So here technology will not be a challenge. Generally speaking, fintech projects can be some of the most challenging projects in the world. Here technologies applied can be the difference between success and failure. Need to process 10K transaction per second with a mean latency under 1/10th ms. You will need a proven technology, probably need to resign from standard application servers, and write a lot of stuff from scratch, to control the latency on every level of critical path.

Mobile, web, desktop? This is more of a business decision than technical. Some say the desktop is dead. Not in trading. If you sit whole day in front of the computer and you need to refer to more than one monitor, forget the mobile or web. As for your iPhone? This can be used as an additional channel, when you go to a lunch, to briefly check if the situation is under control.

 

8. The Culture.

After all these points up till now, you have a talented team, working as a well-oiled mechanism with agile processes, who know what to do and how to do it. Now you need to keep the spirits high through the next months or years of the project.
And it takes more than a cool office, table tennis, play station or Friday parties to build the right culture. Culture is about shared values. Culture is about a common story. With our fintech products or services we are often going against big institutions. We are often trying to disrupt the way their business used to work. We are small and want to change the world, going to war with the big and the powerful. Doesn’t it look to you like another variation of David and Goliath story? Don’t smile, this is one of the most effective stories. It unifies people and makes them go in the same direction with the strong feeling of purpose, a mission. This is something many startups in other non fintech branches can’t offer. If you are building the 10th online grocery store in your city, what can you tell your people about the mission?

 

Final words

Fintech software projects are usually technologically challenging. But that is just a risk that needs to be properly addressed with the right people and processes or with the right outsourcing partner. You shouldn’t outsource the responsibility of taking care of your customers or finding the right market fit for your product. But technology is something you can usually outsource and even expect significant added value after finding the right technology partner.
At Empirica we have taken part in many challenging fintech projects, so learn our lessons, learn from others, learn your own and share it. This cycle of learning, doing and sharing will help the fintech community build great systems that change the rules of the game in the financial world!

 

 

New tendencies in Robo Advisory space

In case you haven’t yet learned about the new robo financial advisor businesses (or digital counselors ), this should be the year you do. They are fast growing and gaining ample assets.

Based on a study by Corporate Penetration, from April 2014 to July 2015, the top robo-advisors — or automated investment services as many choose to be called — went from $115 billion to $21 billion assets under management

With these new companies bringing more investors and with all the business continuing to mature, there will undoubtedly be many changes that affect the robo-advisory market. Here’s that which we are prone to find in 2016 and beyond.

Legacy Firms Go Robo
As the robo-advisor industry grows it will continue to attract the attention of financial services companies that are established. These corporations desire to offer what their clients need — money management that is easy — while at precisely the same time bringing more funds to manage. Right now they’re losing dollars to the upstart robo-advisor companies under direction. Since the amount of money under management determines how much money firms can make, they will pay attention to the reason why they are losing out on new investment dollars.

Just previously year, Fidelity Investments, Charles Schwab Corp. and The Vanguard Group have either created their own digital services unit or partnered with an existing pureplay robo business.. You’re able to get the other large companies to join the trend.

Increased Kinds of Investment Options
They work by ensuring you’ve got the right asset allocation for your targets using index funds. A number of them subsequently additionally use tax loss harvesting as ways to improve yields.

Beyond their own original assumption of money management that is digital, robo-advisors will start offering options as a means to obtain a competitive advantage in a increasingly crowded market. You could possibly end up seeing matters such as portfolios according to different analytical strategies using beta that is intelligent and technical analysis. Businesses will use these investing alternatives in an attempt to make their services more appealing to those that desire to overcome and time the market but still do not want to manage their own portfolio.

The Flip Side
One trend that will probably coincide with robo-advisors’ evolution is lousy investment options. We have to be prepared to see existing companies or upstarts begin offering robo services at extremely high fees. We will also probably see this paired with awful investment choices which have fine print that is concealed and additional high fees that’ll lock customers into contracts

It’s no different with index funds that bill more than 10% for the same thing you can get for 006%.. Such funds continue to be in business because people get demanded by salespeople that are competitive to put their money there or they do not take the time to comprehend what makes a great investment. The sort of companies that run these funds may achieve success by trumpeting a trend and preying on consumers that are uneducated.

Mergers, Acquisitions and Closings

Depending on at, it’s projected there are about 200 robo-advisor companies out there, many which don’t have a lot of assets under management. Together with the area this packed, expect to find acquisitions closes and mergers. The rate of employee turnover in the marketplace might be fast given that robo-advisors tend to have smaller borders as a result of lower fees they charge. And when it comes to survival of the fittest, it’ll probably be problematic for independent robo-advisor to gain enough traction to make it on their own..

The consolidation is already occurring — BlackRock Inc. recently purchased Future Counselor and Northwestern Mutual Life Insurance purchased upstart online money supervisor LearnVest.

More Options for Private Guidance
Robo-advisors work nicely without important life changes on the horizon for clients and for individuals who don’t need added services such as estate planning. Robos choose all the stress out of obtaining the right asset allocation and investments; they are also maintained by them without an excessive amount of cost.

Nevertheless, as investors reach stages in their life where they want more advice that is personalized to work through choices — buying a property, saving for college or getting ready to retire — they’ll want access to more than simply a computer program

That is really where the robo-advisor firms will start to incorporate human counselors to help with matters that are more complicated. This may mean an increased fee to obtain a person that is dedicated adviser, or it can mean that one is paid for by customers as guidance that is more involved is needed. The natural evolution of the market’s can lead to conventional human advisors accentuating their practice by pairing up having a while label robo-advisor to offer the automated investment services ; premium services which demand a dedicated financial advisor may still be offered when needed
Robo-advisors are here to remain, but the services will continue to evolve to generally meet the demands of younger investors over the course of their life. For when they may be needed and more investment options, this includes services that are increased. With an increase in competition, you are going to see these matters become a large part of the mixture.

The Great FinTech Trends – Robo Advisor Race

The Fantastic FinTech Robo Advisor Race

Possibly no other sub sector of the arena that was fintech has received as the robo advisors as institutional and retail interest. The company of financial planning and personal investment impacts substantial pools of capital and large investor sections. Innovation in the investment technology space is creating a race that is furious among insurance companies and startups, brokerages, wealth management businesses to serve a changing and evolving account base. .. But you will find many factors to consider as competition heats up
Who Are the Robo Advisors
By now, the robo advisors are familiar to almost all fintech watchers. Their services include automated portfolio preparation, automatic asset allocation, risk assessments that are on-line, account re reconciliation and other digital tools. Well known players comprise Theme, Wealthfront, Betterment and Folio , among others.

Generally, robo advisors allow more folks, who otherwise may not be able meet account minimums or to invest with confidence, to enter the market in a passive way. Conventional wealth management companies and financial advisers cost 1% of higher or AUM. Robo advisors fulfill a need for more economic, automated and digital preparation tools which might be preferred by younger, digital informed investors or those who want more privacy and control over their portfolio.

Nonetheless, it’s not other younger generations and merely the Millennials who favor digital investment tools. Firms have figured out this and are starting to compete with the robo advisors.
For on-line brokers, robo advising feels like a natural extension of what was already an electronic service. Stock brokers went through a substantial transformation in the late nineties during the first dot com boom and most, or even all, became online agents. More fascinating is the degree of interest in robo advisors from very traditional players such as insurance companies, asset managers and wealth management businesses. Buy, these firms are aggressively moving to assemble and associate with robo technologies

Below is an inventory of some of the announced mixes and launches within the last two years:

* Northwest Mutual acquiring Learnvest

* BlackRock acquiring Future Advisor

* Invesco obtaining Jemstep

* Vanguard launching Private Adviser Services

* Charles Schwab found Scwab Intelligent Portfolios

* Fidelity Investments launching Fidelity Go

* E*Trade launching Adaptive Portfolio

Challenges and Concerns

The decision for traditional financial institutions to compete with robo advising is, on the one hand, practically apparent, while requiring some complicated factors. Lower fees and the digital transformation changing the financial services sector has become an universal subject. The main tactical dilemma for conventional players who enter robo advising seems to function as impact to their current business
A vexing dilemma for those players with an incredibly big AUM base is the potential cannibalization of their fee revenues. If these players switch to a robo advisor model and charge lower fees for the same AUM, they will, essentially, have to attract a larger AUM base to make precisely the same fees as before, while at the same time investing in new technologies to support the automated preparation and digital toolkits. Cost reductions might need certainly to come from a reduction in headcount among their financial adviser sales force to maintain profitability in the midst of these capital outlays.
But it can be even more complicated for those players who desire to offer a hybrid vehicle service including the digital toolkits of a robo advisor while offering light touch individual counselor services. For these kinds of offerings, distinct tiered account services, with changing fee levels might be a more intelligent strategy
Offering a robo advisor service might be an opportunistic play for wealth management businesses who sit at the nexus of the inter generational wealth transfer which is taking place. .. Losing accounts through the inter generational wealth transfer is a stress for businesses who heavily rely on the Baby Boomers and the Silent Generation for much of their fees. The situation is very different today, while older generations may have profited from traditional advisors during an age of very high returns and interest rates. Companies must navigate these waters carefully not to appear too digital to their traditional customer base, while also not appearing to be laggards to your customer that is younger that is prospective. While a robo advisor service might be an excellent way to keep AUM amounts steady inside the business, as younger family members inherit assets from older ones, it may have to be branded separately from other types of accounts.

FinTech Tendencies :

There’s an age old question in wealth management and investment guidance : Man or Machine. The conflict has started today.
Over the last six years, a related section of FinTech that’s received a lot of curiosity, and a fair share of controversy, is automated investment services… or what’re frequently called “robo advisors. ”
These technology-backed advisors were assembled on the premise that many of the actions performed by a Registered Investment Advisor (RIA) can be replicated by complex intuitive software. They guarantee lower prices, simplicity of making investing “fun” and also the bonus potential.
Robo – advisers like Wealthfront and Betterment have realized something that 99% of startups never do – turning an idea into an organization that is growing, prospering, and has the chance to be a permanent fixture in its industry.
In reality, the $47 trillion wealth management giant BlackRock only acquired FutureAdvisor, another robo advisor platform with $600 million under management

But the process of creative destruction in the FinTech business is occurring so quickly, I started questioning whether dangers that were competitive can already jeopardize comparatively new success stories like these. Looking at the companies that bookend them – the old-guard firms on one side, and the brand new crop of products and startups on the other — I came away with a healthy dose of skepticism on the future of the stand-alone robo-advisor.

Robo Advisors and the Bet on Millennials
One of the central selling points robo advisors made to the VCs who have funded them was a toxic mistrust of more traditional wealth counselors and financial services firms, their DIY attitude, and millennials’ internet savvy. Given the two important financial disasters they’d experienced in their lifetime, these millennials supposedly harbored a degree of mistrust for the fiscal brands their parents revered that would make defection a near-certainty. They viewed the large banks as inherently bad, and perilously self interested.

As it turns out… a recent report conducted by Salesforce indicates that many millennials actually do favor having an advisor.. Eighty-one percent wanted their counselor to manage their money completely alone, or collaboratively with them compared to 86% for Gen- 89% for Baby Boomers and X’ers — not that distinct.
What is more astonishing is that millennials stood out as the generation most interested in face-to-face interactions with the advisor – 47% get investment advice versus 36% for Gen- 46% for Baby Boomers and X’ers. The number one reason millennials gave for firing their adviser was high fees, which robo- counselors have exploited with fees that are a fraction of the cost of conventional wealth management
Millennials are certainly somewhat less comfortable relying completely on technology as the incumbent robo, while their preference for technology was unmistakable – advisers envisaged. There stays a definite desire to learn just how to manage cash, in order to ask questions, express financial goals and to have a trustworthy adviser involved.

In short, it seems that robo- advisors won’t replace the conventional advisor ; they will sit alongside them to provide an optimal blend of human and technology brains.

In response to fit what younger investors are searching for, and to the increase of Wealthfront and Betterment, conventional financial advisors like Schwab and Vanguard recently established “robo advisor platforms” of their own that comprise a substitute for connect to an individual, if desirable.
They’ve slashed fees, and now offer a wider array of investment vehicles than the incumbent robo – advisers. And with early stage investments in FinTech quadrupling recently, it’s no surprise that after only a few months these hybrid platforms attracted an amount of capital that’s many times greater than what the stand-alone robos had accumulated in years.
What this tells us is that Wealthfront and Betterment are correct — many investors have elected to cease paying their more traditional RIAs for a service in which some facets can be performed by technology, info, and automation. And these benefits extend much beyond those who can afford the guidance of Schwab peers are ’sed by it. Millions of middle-income families may have access to a greater degree of guidance that is advanced than their net worth may have ever enabled before
But technology can’t create an investing worldview from an individual ’s special demands and aims, hold their hand and encourage them to stay composed. And these human qualities are valuable to investors than these companies may have estimated
Boom or Doom For Stand Alone Robo Advisors?
Since the incumbents offer merchandise that is similar with comparable fees, the stand alone advisers will need to convince investors that they have something the big guys don’t. Despite the trust and their inventions they’ve constructed with many investors, the stand alone robo-advisors haven’t yet shown they can generate better yields, net of fees. So they’ll need to explain how and why their algorithms are not inferior to the algorithms other companies can create. But if investors find the prospect of managing cash overly complex, the nuances of algorithm building will probably not make for a good advertising hook.
The recent spike in advertising by Betterment and Wealthfront indicates that they feel a need to match Schwab, etc. on their field of battle – which is a scary proposition given how well- financed the big brokerages are, and how seasoned they’ve become at mass media marketing.

It’s also likely to be a losing battle because incumbents like Fidelity and Vanguard can create fees on the inherent ETFs they put in customer portfolios, enabling an extended life value and therefore greater allowance for higher client acquisition prices.

Reed Hastings said that before HBO could become Netflix Neflix had to grow and become HBO. Using this example to the space that is advisory, it appears like the incumbents have refurbished Wealthfront and Betterment ’s secret sauce faster than these firms could replicate that value added human element that Schwab and Vanguard offer
I have no doubt a successful departure lies in these companies futures, but if and when they can be acquired, it’s going to probably be by a traditional company that also realizes that it needs to leverage new technology and become “half- man, half-machine”