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

Empirica lectures on Fund Industry Summit 2014

Empirica was invited to give a lecture on ‘Usage of Algorithmic Trading in investment funds’ at Fund Industry Summit 2014.

Conference gathered representatives from over 70 financial institutions. The event was held in Warsaw and plans are that it will be repeated in yearly cycles. Especially that both organisers and participants deemed the conference a success.

The agenda of the summit included 9 lectures on topics related to investment funds day-to-day operations like MIFID II and AIFMD European Union directeves, Internet funds distribution and organisation of self-care channels.

Empirica’s lecture, held by its CEO Michal Rozanski on ‘Usage of Algorithmic Trading in investment funds’ was a good opportunity to share with the wider audience results of our latest research regarding market impact reduction in high volume transactions.

 

FIS_Mrz_Speach2

Empirica CEO, Michal Rozanski during the lecture at Fund Industry Summit

Fund Industry Summit 2014

 Empirica CEO, Michal Rozanski during the lecture at Fund Industry Summit

Ekipa z Warszawy

 Our team on Empirica conference stand

Video summarizing Fund Industry Summit 2014

Empirica joins advisory board of London’s FinTech Connect

FintechConnect logo

Michal Rozanski, CEO of Empirica, was invited to join advisory board of FinTech Connect. The main purpose of the board would be to share knowledge and experiences with new fintech ventures looking for support.

FinTech Connect is a new initiative for the global community of financial technology stakeholders – investors, financial institutions, fintech startups and solution providers.

Empirica definitely sees a need for one place where people interested in advancement of financial technologies could exchange ideas, experiences and good practices. We are already taking part in similar initiative but on different field – IT Corner association for local software companies – and advantages of such an initiative are obvious to us. When such an idea gets critical mass of people involved that want to be active, then the effect is much more than the sum of its parts. IT Corner is living evidence of that. Therefore we are great fans and we will happily support the development of FinTech Connect.

FinTech Connect provides a digital hub and meeting place for the fintech sector. It allows start-ups, tech providers, investors and financial institutions to connect and do business through community platform. FinTech Connect has already thousands of members and the count is growing daily. In addition to start up events, FinTech Connect provides global seminars and conferences on subjects such as banking security, cash management and commercial payment strategies for corporate treasurers, and cloud IT platforms for financial institutions.

Steve Clarke, the founder and CEO of FinTech Connect says: ‘We launched FinTech Connect because we wanted to provide a global platform and community for  the fintech industry. With the incredible amount of innovation going on within many different technology hubs around the World, there is a natural element of fragmentation between stakeholders and it can at times, seem like innovation is taking place within micro-communities; either in certain geographies, sub sectors or on a smaller scale again within accelerator or incubator programmes.’

FinTech Connect is also organizing Europe’s most exciting exhibition of fintech startup innovation – FinTech Connect Live. This conference will gather over 2000 fintech professionals, over 100 exhibitors and over 100 speakers and visionaries all in one place for two days in London in December 2015.

 

Learn more about FinTech Connect at: www.fintechconnect.com

and about FinTech Connect Live at: www.fintechconnectlive.com .

Our Algorithmic Trading Platform in large brokerage house!

Empirica has successfuly finished the implementation of its Algorithmic Trading Platform in one of the largest brokerage houses in Poland.

Brokerage house will use our software to:

  • aid its internal trading operations, like market making of derivatives on Warsaw Stock Exchange
  • offer functionalities of our platform to its institutional clients, which will be able to build, test and execute their own algorithmic trading strategies

Implementation included connecting of our software system directly to the system of Warsaw Stock Exchange (Universal Trading Platform delivered by NYSE Technologies), as well as the integration with transaction systems of brokerage house. Additionally we have fulfilled and successfuly passed tests regarding the highest security, stability and performance requirements.

This implementation is an important milestone for our system. The usage by team of market makers is a proof that our system is capable of performing high-throughput and low latency operations on level required by most sophisticated traders on the capital marketets.

 

Robo advisors – new wave in FinTech

In the space between DIY investing and personal — but pricey — financial advisors sits the robo-advisor, a crop of firms that manage client portfolios via computer algorithms, cutting prices and passing the savings on to investors. These online advisers have taken off over the last several years: There are currently a couple hundred firms in the race.

What’s a robo advisor?
A robo-advisor is an on-line financial advisory firm that leverages automation and algorithms to help manage client portfolios. That automation empowers robo-advisors to offer investment management services to consumers for a fraction of the price of a financial advisor that is human. Lower fees, joined with superior features like automatic rebalancing and tax-loss harvesting, can yield higher returns.

How they work
Most of the companies urge portfolios of low cost exchange-traded funds according to surveys that are on-line that investors fill out. The thought is that investors will do with generally diversified portfolios and low fees.

The companies use algorithms to put investors into various portfolios according to risk tolerance.

How to use Robo-Advisor

Automated Customer Onboarding – the questionnaire

The questionnaire is the first step of using Robo Advisor. User’s profile is being created with parameters like:

  • age (defining overall risk aversion level)
  • investment goals (defining users expectations)
  • users experience with losses/gains
  • making important financial decisions

Our Robo Advisory platform covers the interpretation of user’s answers into automated advise.

 

Balance projection

Balance projection gives the user quick view how his portfolio balance would look like in the future for given investment values. In order to make the projection more eye-catching we introduced possibility of generating balance curve based on either static growth or mathematical function development. For example, on average, portfolio increases 4% every year.

 

Asset allocation

Asset allocation is the selection process of the right instruments adequate to users risk profile. Our platform allows to automate managing the allocation, using defined algorithm. For example, with higher portfolio risk we can invest more into stocks and with smaller portfolio risk we invest more into fixed income products. Real asset allocation model has to be decided.

 

User Portfolio,

It is possible to monitor user’s portfolio balance in user dashboard. Platform provides history of portfolio balance over the selected period. User is able to check his current portfolio allocation grouped by three factors:

  • Instrument type
  • Instrument sector
  • Instrument region

 

Portfolio rebalancing

Automated portfolio rebalancing is a crucial functionality for robo-advisory service. Let’s assume that user got asset allocation with 60% stocks and 40% fixed incomes. Over the time, because of the reinvesting dividends or other user-defined factor, his portfolio allocation changed to 70% stocks and 30% fixed incomes. User does not want to take such a big risk so we do portfolio rebalancing to back to original allocation.

 

 

List of successful robo advisors

Betterment
Betterment is a perfect starting point for young investors. They make investing easy for beginners by focusing on simple asset allocation, goal …

Personal Capital
A free and easy-to-use service that syncs up all your financial accounts in one location. Personal Capital creates summaries of your spending, net …

Wealthfront
An automated investing service with an emphasis on asset allocation with low fees. Wealthfront’s service really shines with taxable accounts….

Stash Invest
Stash could be the perfect investment app for a new investor. Its $5 minimum initial deposit removes the single biggest obstacle to investing, but the…

Fidelity Go
Fidelity’s entry into the robo-advisor service helps beginning investors. Its pricing is very transparent, and if you have an existing account, …

Aspiration
Aspiration may be the perfect robo-advisor service for anyone who wants to invest in socially responsible companies. They have low fees, and the fee-…

Vanguard Personal Advisor Services
Overall a solid entry into the robo-advisor space. Though the service will exclude beginning investors because of the high minimum deposit. Other robo…

WiseBanyan
WiseBanyan is a free robo-advisor service with some decent features. Unfortunately, we question if the business model is sustainable….

Hedgeable
Hedgeable brings the techniques of hedge funds down to the less well-heeled masses, so everyone can have access to the investment industry “secrets.”…

TradeKing Advisors
TradeKing Advisors is a platform well worth investigating if you’re looking for professional investment management at a very low fee and $500 deposit …

Charles Schwab Intelligent Portfolios
Overall a decent service that deserves a looking into. Though we question its large allocation to cash and choice of some of the ETFs in order to make…

LearnVest
LearnVest is a decent free budgeting tool. Though compared to its competitors lacks investment reporting. Financial planning is available for an …

Rebalance IRA
Rebalance IRA provides insight into your portfolio and helps you make better decisions by not letting emotions get in the way and selling too often, …

AssetBuilder
AssetBuilder might be a reasonable service to use on large accounts, particularly over $20 million where the annual fee is just 0.20%. But on smaller …

Financial Guard
Financial Guard offers straightforward advice, to upgrade your current portfolio, pay lower fees, and choose better funds. Their business model is …

SigFig
SigFig itself isn’t a bad service, but their recommendations seem simple at best. There are better robo-advisors available….

Wealthsimple
Truewealth

Personalcapital 

FutureAdvisor 

 

Extending the customer base

With a customer base that the size of each of the competition combined, based on Stein, robo advisory Betterment can also be bringing folks, along with assets. It’s not difficult to chalk that up to Stein, and its $0 account minimum admits that some of Betterment’s accounts are modest. But he says all of the customers counted in that tally are saving into funded accounts, with most putting a sizeable amount that is “ away.”

That minimum — or instead, the lack of one — has set the pressure on other robo advisors as well as traditional advisors, many of which have dropped their own minimums over the past year. Private Capital, which has $1.8 billion in assets under management, recently lowered its account minimum by an ambitious 75%, falling from $100,000 to $25,000. The company might have the ability to get away with a minimum still in five digits because its customers also get a dedicated financial advisor.

TradeKing Advisors has lowered its minimum. It found its two tiers of service with initial deposit conditions of $25, and $10,000 000; those minimums now sit at $ and $5, 000. Rich Hagen, the business’s CEO, told NerdWallet that minimums were lowered to remain competitive.

And Wealthfront lowered its account condition 500, noting from $5,000 to $ in a blog post that it was reacting to a “surge in demand” from youthful robo customers . Those customers desired to take advantage of Wealthfront’s generous pricing arrangement, which manages the first $10,000 completely free (Betterment bills 0.35% on accounts under $10,000 that consent to a minimum $100 monthly auto-deposit; those without auto-deposits are charged a monthly fee of $3. That $3 a month — which amounts to more than 7% per annum on a $500 balance — is a point of contention between the two robo-advisors, including a public war of words on Medium.)

 

 

What to look for

To the reader that is causal, the differences between robo advisory companies might appear small but in reality isn’t. You’ve got a choice between:

  • Minimuml Deposit – Some robo advisories it is possible to start out with others and nothing need substantial sums to begin with
  • Yearly Fees – Know about ETF fees and hidden costs
  • Asset allocation – Asset allocation of each robo advisory may differ quite a bit based upon how old you are, and just how their risk assessment questions are answered by you
  • Account Type Support – Do combined, they offer individual, IRA, etc.
  • Automation – Some robo services are 100% automated vs human assisted advice
  • Tax Optimization – Services like Tax-Loss Harvesting
  • Custody of Funds – Handled by you in which they give advice to trading, or directly by the company
  • Management of Assets – Manage only a part or all of your assets
  • Ending-Target – Retirement simply, or other targets (i.e kids education)

 

Best Robo Advisors – Breakdown by Asset Size (2016 Ranking Comparison)

Below is the listing of this year’s top robo advisors by asset size.

# Robo Advisors Total Assets Under Management*
1 Betterment $4,200,000,000
2 Charles Schwab $4,100,000,000
3 Wealthfront $2,800,000,000
4 Personal Capital $2,100,000,000
5 FutureAdvisor $600,000,000

Next release of our algorithmic platform. Version 1.3.4 – has code name “The Firebolt”.

Next implementations of our Algorithmic Trading Platform by customers don’t stop us from developing the platform itself. Working agile requires us to keep the pace in short and frequent iterations, which in case of product means frequent releases, keeping the whole product line stable.

A few iterations that we planned in our 1.3.4 release, code named by our developers ‘The Firebolt’, will include among others:

– even faster real-time replication of all server-side components in master-slave mode (for deployment in larger institutions)

– extended client side backtesting capabilities

– sophisticated charting of backtesting results and statistics

– multiscreen mode of client side application

– additional web-based server-side module for administration & management

 

For those curious about the release name and unfamiliar with Harry Potter, Firebolt is:

“The state-of-the-art racing broom. The Firebolt has unsurpassable balance and pinpoint precision. Aerodynamic perfection.”
—Harry Potter: Quidditch World Cup

“The Firebolt has an acceleration of 150 miles an hour in ten seconds and incorporates an unbreakable Braking Charm. Price upon request.”
—Harry reads about the features of the Firebolt.

Speed, precision, balance, perfection. These are the words that describe our software, therefore choosing the code name was kind of obvious :).

 

The Firebolt broom

Warsaw Stock Exchange certifies our Trading Platform

 

Empirica’s Algorithmic Trading Platform has successfully passed the XDP protocol communication certification, issued by the Warsaw Stock Exchange.

From now on Empirica is officially listed as the ISV (Independent Software Vendor) for the Warsaw Stock Exchange.

WSE uses Universal Trading Platform delivered by NYSE Technologies. The same system is used by many other European and world stock exchanges. Fulfilment of technical criteria of Warsaw Stock Exchange makes certification for those markets only a formality for our platform.

The look at best companies in robo advisory space

Some of the recent technology led disruptions in the financial industry are in the areas of giving, payments, money transfers, wealth management, data that was big and cybersecurity. Furthermore, blockchain has opened up endless possibilities for online transactions without need for an intermediary. Today Fintech companies provide financial services using different types of high tech alternatives, thereby competing with the conventional businesses.
More than 20% of financial services business is at risk to Fintech. The financial service players comprehend the threat, but, aren’t certain about the best way to react. E.g., 57% financial services players are unsure about how to respond to blockchain technology; though there is huge potential for transformation through adoption of blockchain in each area of financial market, e.g., capital markets.
FinTech in Wealth Management
The key FinTech led innovations in Wealth Management are in the areas of appraisal of risk profile of the investor, automatic asset allocation, advanced analytics for better investment support, integration of social data for enabling investment decisions, standardization of advice & products to appeal to the cost- conscious investors, scalable distribution design for tapping emerging markets, enhanced performance abilities from integration with decision support systems and shift to technology enabled investment guidance with exception based human intervention[iv].
Financial Advice
When selecting wealth managers clients value a business’s standing and trust more than a counselor’s standing. And though planning is an important factor in driving clients to wealth managers, it becomes more irrelevant when actually choosing an advisor/business. Over 50% customers speed digital channel and self- service capabilities as the top variable for client service encounter, followed closely by accurate account information and efficient procedure. Clients say sites and mobile capabilities will be their primary channels for receiving guidance (59%) compared to divisions (26%) in another two to three years. 46% customers are willing to start an account with robo advisor.
Robo Advisor technology has the potential to cause the largest disruption in Wealth Management, since it’s at the core of most of the above innovations. Robo Advisors basically transform the most significant element of the Wealth Management business, viz., financial guidance.
Products created banks, by asset managers, insurance companies and others to the investors are delivered by the Wealth Management Value Chain.
The whole Wealth Management value chain is influenced by Robo Advisors:
  • Investors – anticipate to get standardized advice through digital channels at any time of their choice, low cost, through self-service mode
  • Advisers- consequently align the merchandises and rely extensively on analytics capabilities of the Robo Advisor to examine investor’s profile and inclination
  • Dealer Groups & Product Makers- keep the standardized products off-the-shelf to satisfy investor’s demand, e.g., wraps
  • Asset Managers, Banks & Insurers – Create and distribute products especially targeted at the investors who need low cost, standardized products, e.g., index funds
With the growing competition from new Fintech players like WealthFront, Betterment, LearnVest, and FutureAdvisor, the mainstream adoption of Robo Advisors is bound to gain impetus.
Best Robo Advisors in 2016
 
The robo advisor field is getting crowded, with new platforms springing up consistently and changing frequently. These exciting algorithmic automated trading platforms comprise of many different players. Some robo advisors (or digital advisors) have higher minimums and more advanced investments platforms. Others use a low cost, low fee secure of index ETFs and mutual funds.
Picking the five finest robo advisor for 2016 is a job that is challenging, because the best robo-advisor for you might not be the best option to your neighbor. Having said that, we’ll analyze, several factors and standing robo -advisers based upon these criteria; low initial investment, low fees, and quantity of services. In general, each of the five finest robo-advisors for 2016 offer well-studied, low fee investment options.
In this evaluation we’ll assume that lower fees and lower investment minimums are preferable along with portfolio management services that are greater. This study presumes that more investment alternatives don’t automatically translate into a much better product while some investors prefer access to a greater variety of investment options. (For more, see: Are Robo Advisors and FA’s Worst Nightmare?)
1. TradeKing Advisors
TradeKing an affiliate of TradeKing Securities, Advisors , LLC is a web-based investment advisory service that offers professional portfolio management to all investors at an affordable cost. The investment process is not difficult. Several questions are answered by you from a risk tolerance questionnaire. Next, TradeKing Advisors provide you with a diversified investment portfolio, managed and designed by the industry experts at Ibbotson Associates, a Morningstar firm.
TradeKing Advisors offers two investing strategies, Center and Momentum portfolios. Additionally, TradeKing is the only advisor in this list that offers the momentum approach.
To develop a portfolio you need at least $500 for a Core Portfolio and $5,000 for the Impetus Portfolio. The five Core Portfolios include a maximum of 17 asset categories with a mix of exchange traded funds and notes. The advantage types comprise national equities, foreign equities, fixed income securities as well as real estate assets. The Momentum Portfolios attempt to harness the market movements and trends.
There is no minimum investment amount to start an account. Fees for portfolios worth more than $5,000 are competitive at TradeKing. The yearly fee for any size Momentum portfolio is 0.50% AUM.
For an additional fee, investors in Core Portfolios may subscribe to Risk Support, an application that tries to stabilize your investments by reducing equity exposure ’ values. The cost for adding Threat Help to Center Portfolios is an additional 0.50% or 0.75% (0.25% 0.50%).
In return for the advisory fee your preferred portfolio is constructed and manages by the adviser. This consists of reinvestments and rebalancing. There are no transaction fees. Unlike most of another robo advisors, TradeKing does n’t offer tax loss harvesting. (For more, view: TradeKing vs. TradeStation: Which Meets Your Needs?)
2. SigFig
Unlike the other robo advisers mentioned, you do a distinctive account is opened by n’t but keep your present investment accounts.
SigFig begins with a quick risk quiz, based upon how old you are and time horizon. The platform has a robust portfolio tracker program which reveals investment yields, your asset allocation, fee breakdowns and more. They have two kinds of services, Asset Management and Diversified Income. This post targets the Asset Management offering.
Funds are recommended by the SigFig strategy based upon a variety of standards, including risk-adjusted three-year historic performance, fees, evaluations and various other variables. That is a $2,000 minimum balance.
SigFig is free for accounts less than $10,000, and the first $10,000 is always handled for free The accounts worth more than $10,000 also have access to an on-line personal investment . that is advisor
This tool optimizes your portfolio and helps minimize fees and maximize returns. When managing a portfolio, SigFig asserts to pick lowest fee funds considering tax impacts and while optimizing returns.
3. Wealthfront
Wealthfront manages a personalized, diversified investment portfolio with a variety of low fee ETFs and builds. The portfolio asset categories are allocated based on the results of a threat survey that was short
Wealthfront’s investment strategy is grounded in modern portfolio theory passive investing strategy. This strategy strives to give the investor the best yield for the least number of danger by using low cost funds.
Wealthfront recently lowered its minimum investment amount to an affordable $500. Additionally, there are not any management fees for accounts valued at less than $10,000. Once you hit $10,000 the Wealthfront platform fees are 0.25% of AUM. Similar to SigFig, always is the first $10,000 handled free. There are no trading fees and the underlying mutual fund fees average a low 0.12%.
Wealthfront offers several portfolio management services that are added. The single-stock diversification service addresses the ‘overweight in company stock’ problem for employees with an abundance of business stock. The company claims to practice ‘tax- optimized direct investing ’ a strategy for tax-loss harvesting and minimizing investing prices. In lieu of the actual index ETF, individual stocks representing an index are bought under this particular practice in order that particular stocks may be sold for tax loss harvesting. The company also performs ‘day-to-day tax-loss harvest’. Finally, Wealthfront offers regular rebalancing.
4. Betterment
Wealthfront’s closest competition, Betterment offers a low cost, investing approach that is passive, index fund. Betterment starts out with a brief hazard questionnaire. Betterment guarantees to get each customer and the greatest yields for the least amount of risk the optimum fund mix. Their offerings include 12 asset classes that account for time horizon and your risk inclination.
Similar to Wealthfront, Betterment’s investment alternatives include low- index reciprocal, fee or exchange traded funds. The Betterment platform allows for up to 12 stock and bond funds signifying both international and U.S. investment opportunities.
Betterment’s fees range from 0.15% to 0.35%, depending upon the AUM and auto-deposit pick. Betterment does not have a minimum investment amount. For accounts valued at less than $10,000 there are 2 pricing options; with at least a $100 per month auto deposit, the management fee is 0.35%, without automobile deposit, the fee for lower balance account is $3.00 per month. There are no additional transaction fees, except the fundamental low expense ratio fees billed by the fund companies. The ETF management fees range from 0.09% to 0.17%.
Eventually, services that are additional are additionally offered by Betterment. Consumers receive personalized advice, intelligent rebalancing, tax efficiency that is extreme and tax loss harvesting. (For more, see: Wealthfront Versus Betterment)
5. Schwab Intelligent Advisor
Schwab’s recent entry into the robo advisor domain makes a splash on account of its model that is free. This platform guarantees no advisory fees, account service fees or commissions. Schwab Intelligent Portfolios calls itself an “on-line investment advisory service that rebalances your portfolio, and assembles, monitors -so you don’t have to.” Similar to Betterment, Schwab is aims- established and helps you keep on top of your savings and income targets.
Schwab requires at least $5,000 to open an Intelligent Portfolios account. That is the highest minimum prerequisite for each of the robo-advisor discussed in this article.
The first 12 question query form gives Schwab the advice to design your portfolio. Although their ETF portfolio allows for up to 20 asset categories, your individual account may not contain each of their offerings. Schwab has the broadest asset classes and investment options of any of the former advisers that are automated and includes property, fixed income, stock, and commodity ETFs. Where Schwab differs is in the allocation to cash. Each Intelligent Portfolio has a percentage invested in cash. Schwab clarifies that cash is not unimportant to some well-diversified portfolio and enhances stability, liquidity, diversification, and protects against possible inflation.
Schwab can afford to offer a no-fee service because they’ll get earnings on the consumers’ investments their ‘Schwab- money market funds’ and branded ETFs. Additionally they may be compensated by the firms which make the trades. As with all of the companies, there are annual management fees for the underlying ETFs. According to Schwab, “ETFs offered by other online advisors have operating expense ratios in ranges similar to that of Schwab Intelligent Portfolios.” The total operating expense ratio of a typical portfolio will range from 0.12% for a conservative portfolio for 0.25% AUM for the more aggressive investor.
Schwab’s services include the typical automatic rebalancing. Eligible for the automatic tax loss harvesting .
In accordance with the criteria of low fees, diverse index fund offerings, and robust services, the best robo advisor for 2016 goes to SigFig. SigFig offers the most extensive collection of services, including an online private adviser for accounts greater than $10,000. Their app is state of the art and the portfolio corrector is powerful. That said, it’s a rough contest to call the winner of the ‘best robo advisor’ because it is important to think about your own personal situation. If you will want platform which holds your assets within their custody, then certainly one of the other robos might be a better fit for you.
 
 
Why humans are not best at wealth management
 
Most financial advisers are human. And that’s an enormous difficulty.
Humans come hardwired with cognitive biases that frequently lead them to make best choices that are financial. Research implies that people see patterns in data where none exist, they believe they’re more knowledgeable or skillful than they actually are, and they overlook possibly important advice, even when it’s as clear as a gorilla on a basketball court, as a well-known experiment proved.
And, regrettably, financial professionals are equally as individual as their customers, leaving them just as vulnerable to cognitive biases. Studies have found that mutual-fund managers—professionals who are arguably very inspired to beat their inclinations that were adverse — make expensive investment mistakes, just like others.
The effect of those errors is important underperformance. One of the big appeals of advisers that are human is active management—the thought that these are investment experts who make moves that deliver returns that are larger than simply tracking an index, for instance.
Yet the evidence consistently demonstrates that managed funds have a tendency to underperform passively managed ones. So pick an unpredictable although active human advisor as opposed to a robo advisor, which will typically take a passive approach that produces yields that are more consistent?
If investors feel confident that cognitive biases can be defeat by their human adviser, there’s another issue to consider: Human advisors have financial incentives that don’t constantly work to the benefit of their clients.
An investor with deep pockets might sidestep this issue that is particular by seeking an independent advisor who charges an hourly consulting rate in the place of relying on commissions or performance fees. But many individuals may not be able to manage this alternative.
Consider an investor socking away a handful of thousand dollars every year over a lifetime. A human advisor might charge that investor an annual fee of 1% to 2% of assets versus a robo-advisor fee of 0.25% to 0.50%—a difference that can amount to tens of thousands of dollars in lost wealth. Robo advising offers a viable, low cost investment option that’s within reach even of investors that are new starting out with little nest eggs.
Needless to say, the robo-advisor name is a tiny misnomer; some of these services offer their clients the opportunity to connect to a person if they believe they want additional hand holding. That fuels the argument that robo advisers can’t supply the in depth, hands-on services that people can.
Yet, in several cases, digital advisors are fully capable of providing cogent evaluation and helping investors understand aims and their needs. Actually, in some instances, a robo advisor is even better equipped to provide service to customers than a human adviser. But a robo adviser could send all its clients electronic messages at the same time to remind them that their portfolio was selected with their characteristics in mind, and it remains appropriate in the face of market changes.
It’s additionally important to note that while investors may feel comforted by the idea of the “human touch,” the conflicts of underperformance and interest at traditional advisors help it become clear that the human touch may cultivate a false sense of security.
Needless to say, robo advising won’t fit every situation. Investors with complex company, estate or tax circumstances may benefit from the more customized guidance of a conventional financial adviser. But for the majority of investors, robo advising offers advantages that can interpret into a more buxom bottom line as opposed to typical adviser that is individual can deliver.

Robo Advice and digitalization of wealth management

In practical terms the present marketplace for robo advice may be divide into three distinct groups: fully automated non-discretionary investment guidance ; self service investment and financial advice ; and guided investment and financial guidance.

Fully automated non-discretionary investment advice refers to an individual subscribing to advice and wealth guidance that is executed without the customer’s explicit approval.

Accounts that are managed match this dealer and definition group model portfolios could probably be set here as well, particularly if the portfolio is rebalanced periodically without customer authorization at each rebalance.

The term ‘robo advice’ has rapidly evolved to cover upwards of 80 automated guidance and investment options internationally

The key distinction between these investment strategies and also the brand new crop of robo advice offerings is that the client which fund or portfolio to get in is advised by the new kids on the block. Conventional managed accounts, on the other hand, rely on an adviser to choose the initial portfolio predicated on appetite for danger and their clients ’ personal conditions.

The new breed of automated investment alternatives still apply the rules of passive investing diversification and routine rebalancing. Many also offer tools that are extended, including tax lot picking, to optimise capital gains tax results. What actually sets them apart though is an instinctive, clearly defined and consistent investment approach that resonates with experienced and novice investors. As these solutions continue to innovate, they’re going to increasingly appeal to a wider audience.

Self service investment and financial advice describes the provision of digital tools to support customers in creating, scoping and identifying wealth advice and guidance, usually in relation to range or a specific goal of aims, like an income stream in retirement or savings for instruction. They may use behavioural financing methods to support customers to regularly monitor and lead to their wealth journey.

The primary difference between these robo advisors as well as the automated investment options is that they optimise and allocate cash flow across many goals. Optimising across targets is particularly troublesome given that across different countries there is likely to function as the intricacy of pensions procedures and income tax. For example, one question that sounds simple but is not quite easy for robo advisors to answer could be whether a client should make voluntary contributions or pay the mortgage down. Then chances are it optimises on investment rather than on strategy, in case a robo advisor can’t answer this fundamental question.

Why is these varieties of robo advisors even more compelling is the aggregation of client data.. This enhances the user experience and removes unnecessary friction from the goal -setting process. It can be integrated into the tool where the wealth manager already has investment and private data for the user. Alternatively, the front-end program could request the user’s various account details.

This gives the robo advisor a strong edge as it monitor movements in the investments may link every one of the accounts together and track ongoing progress towards targets. At minimum, the robo advisor could employ basic user information, such as for example suburb and their age, and offer an approximation in their income, expenses and assets.

Fiscal guidance and the guided investment is focused on holistic strategies. It includes conventional face-to-face guidance, along with remote guidance delivered within the phone or by video. It also comprises omnichannel advice, where a person is involved or ultimately in charge of the guidance strategy.

There really are numerous services available that provide on-line tools and access to a financial advisor to get a one-off initiation fee and monthly cost that is low. These suppliers have adopted a user-friendly and simplified approach to the financial guidance process, with some even giving automated investment guidance supported by way of a financial advisor that was real.

Are conventional wealth managers right to view robo advisors as a danger?

Will robo advisors replace actual financial advisors? The answer is, probably not. The more likely scenario is that the work done by financial advisors that are real will be complemented by robo advisors.

Where the two worlds are more inclined to collide is in an adviser – led robo advice tool becoming part of customer service process. This may mean robo advice being part of servicing that is omnichannel. This has real value and will revolutionise financial guidance based on the rules of customer-centricity, connectivity, contemporariness and conformity.

Are a confluence of technical improvements and social variables establish to propel the robo advisor trend even further?

There are quite a lot of points at which financial innovation has frightened mechanisms that are conventional on Wall Street. Now with new fiduciary standards and artificial intelligence emerging, a new threat is emerging: The robo advisor

Not since the dawn of low-cost brokerage firms has the traditional wealth management industry as it does with the emerging popularity of robo advisors, confronted as great a challenge, a 137 page June report from Financial Technology Partners observes.. The report states

“With the advent of Automated Digital Wealth Management solutions (aka robo advisors ), the standard wealth management sector is facing perhaps its most disruptive danger since low-cost online stock trading emerged in the mid 1990’s”

Robo advisor tendency began with upstarts moving to large banks as well as asset management firms

Highly credible digital wealth management solutions began the robo adviser movement, as roll outs from the likes of independent companies for example Betterment, Wealthfront and FutureAdvisor (which was recently obtained by BlackRock) and more recently Shrewd Banyan are a few of many that set the stage.. The Development of Automated Digital Wealth Management Solutions” looked at growing tendencies as well as their complete business impact..

Eventually the game has been entered by more traditional firms like JPMorgan and Bank of America Merrill Lynch. JPMorgan, for instance, is offering robo advisor wealth management as a totally free option to specific clients, while BAML, possibly famous because of its secure of earnings generating human brokerages in the Merrill Lynch department, also expanded into the robo advisor realm and is now on the verge of valuing mutual funds in a fashion much like Morningstar

These tendencies among both institution players and upstarts are coalescing with societal tendencies at an original moment ever, the report notes. Together with impacting financial advisors, mutual funds could be hit, as many of the robo advisors use passive ETFs as their investment vehicle of choice..

Advisor trend that is robo
Societial tendencies driving robo advisor trend, as market bifurcation occurring

For the human adviser, the millennial generation’s predisposition to “do-it-yourselfthrough-an- app ” is perhaps the greatest business killer. This seismic shift is forcing wealth management sector participants across the spectrum to reevaluate their merchandise and supply strategies, using a variety of category segments opening up

At a minimum, all wealth supervisors ought to be highly focused on ‘digitizing’ their companies as consumers of all ages and demographics will increasingly anticipate Uber and an ‘Amazon – like’ experience from all of their financial service providers, ” the report encouraged. “Similar to other recent FinTech initiations, digital wealth solution providers are fast appearing round the earth – in fact, we’ve identified more international direct-to-consumer players than in the US.”

This is creating a distinctive market segmentation with five primary class pails : 1) new direct-to-consumer brands with limited advisor aid, 2) new direct-to-consumer brands with more significant counselor aid, 3) conventional firms with in house digital wealth management solutions, 4) business to business and white label providers enabling others to provide their particular digital wealth management solutions and 5) retirement specific suppliers including both direct-to-consumer and business-to-business providers.

As capital continues to stream into traditional investment management businesses and the digital wealth management space assess their strategies, we expect to observe a noteworthy upsurge in venture and M& An activity in the space over the next 12-18 months, ” the report called.

Dilemmas that could affect the advisor trend that is robo

You can find possible difficulties on the robo advisor horizon that must be navigated which fall into three major categories :

– Does the fiduciary duty standard and also other securities laws apply to robots as they do to individuals?

The report said it was unclear as digital wealth management platforms are not completely accounted for by existing laws on the fiduciary duty of an investment advisor if fiduciary duty laws apply to robo advisers.. In particular, robo advisors may well not be free from conflicts of interest, they may not meet “a high standard of care”, may well not provide “ fully ” personalized investment advice, and might not fulfill other fiduciary standards that a traditional adviser would have to match, the report noted..

– will robo advisors perform in a market slowdown?

Because of the recent tendency development, most of which happened after the 2008 market crash, Robo advisors have been mostly sheltered from a market downturn that was substantial. These applications “could view a sharp shift in assets under management due to market declines and / or customers redeeming due to uncertainty.

– cyber hacking and Will Internet security become an issue

The reported supposed about the “unlikely” event that algorithmic issues that were potential that were “ may cause undesired automatic trading within robo advisor portfolios” While the report played down this possibility, even at the most complex computer-driven high frequency trading businesses algorithmic mishaps have been recognized to happen. “With the growing internet security problems, robo custodians and advisers might be growing goals for harmful intrusions, ” the report said, pointing to an extremely real problem that’s affecting even the greatest & most advanced financial institutions.

Trends in Asset Management

Trends in Asset Management

Asset managers face an existential crisis as they confront the ending of a six-year rise in asset prices. What does the future hold for the sector? Christopher O’Dea inquires

The main trends affecting the asset management industry now contain existential challenges to core investment theory and the business model. Rising asset prices since the monetary crisis have helped asset managers to maintain gross profits despite the shift to low-cost investment strategies and product alternatives. But that tailwind has subsided, leaving asset management firms in the doldrums as storm clouds gather – increasing customer demand for lower fees, new regulation, and closer examination of the social worth of the investment management business itself.

At a glance

• Asset management firms face more dangers with their company.

• Downward pressure on fees has become persistent.

• Americans are asking why there are numerous pension funding shortfalls at defined benefit plans and such modest balances among defined contribution plans.

• Digital capabilities are getting to be more common but the human touch will remain essential.

In a nutshell, threats are rising – not merely threats to the worth of securities in portfolios of investment management companies, but risks to the companies themselves. Now, asset managers are grappling with those threats, which promise to bring technology that is new, reduced employment, lower earnings, and a heightened focus on producing sustainable returns instead of the historic chase for above-market performance.

“The six-year tailwind to asset managers from asset inflation seems to be over,” according to some report on European asset managers by Goldman Sachs International released in April. “ asset inflation, rather than flows drove More than 70% of this,” Goldman says. “This tailwind is at an end, replaced by a more explosive, less directional market backdrop.” In reality, the global investment management business is entering a period of consolidation and reorganisation, setting the stage for what Tim Hodgson, head of the Willis Towers WatsonThinking Ahead Institute calls “necessary re-invention”.

Business model under duress

The starting point for a re-invention is that downward fee pressure a regular feature of the business – is becoming constant. Which will lead to a revenue pool that is shrinking, as customers act on the belief, however well grounded, that active supervisors supply no net value. Hints of that can be seen, as recent growth in business revenue and profits has resulted chiefly from asset-price inflation as opposed to net new AUM. That situation highlights the crux of the issue – the industry is set up to benefit asset managers and related intermediaries, not asset owners and pension plan members.

“we’re interested in the behavior of the investment system,” says Hodgson. “ there are issues out there that are bigger in relation to the asset managers, and Asset managers are part of the system.” Over recent years, the Thinking Ahead team has developed the view that the best means to discern what is for asset managers is to follow the money”. Following that trail leads to the conclusion the investment management sector has a fundamental issue – it is create mainly to help industry providers. In a 2014 survey, Thinking Ahead found that only 42% of industry participants agreed that the industry is primarily designed to help the members rather compared to the agents working within it. In a report on the study, Hodgson wrote: “For a properly configured, customer-focused business, 90% of participants would not be unable to agree with such a statement.”

The result is that too much of the $100trn (€87trn) in capital invested internationally in bonds and fixed income securities is regularly transferred to asset managers and intermediaries in the form of fees predicated on the value of those assets. Asset management pays high wages to stockholders to high margins and employees, Hodgson says to other sectors like food retailing that pay low margins and low wages. The asset management industry is extracting “ rents that are excessive ”, he says.

But asset managers expend tremendous effort transferring securities among themselves in an attempt to have the highest-priced securities in the funds they handle. The exercise doesn’t increase the aggregate value of the international portfolio – for trying to conquer their peers but substantial fees charge.

The value thus transferred from portfolios to asset manager accounts is not insignificant. And BCG says net revenue growth slowed from 9% in 2013 to 7% in 2014 owing to fee pressure and the shift from traditional actively managed products to passive strategies, alternatives such as for example liability-driven investment and target-date funds, and speciality strategies.

Engine needs repair

Managers have responded with several alternative approaches to asset allocation and portfolio construction, including factor investing, smart beta investing and hazard parity. Each has its edges, and put together they’ve helped the asset management sector move to a world of lower-cost investing that targets delivering outcomes that are specific as opposed to attempting to assemble a bundle of securities that create a yield rather better than the usual market index.

Non-traditional strategies are anticipated to pull most new assets in the years ahead. Equity research businesses that are several view BlackRock as the greatest example of where investment management is heading. “BlackRock stays the greatest increase narrative in asset management, with numerous tailwinds supporting its superior P/E ratio and organic fee growth according to a Goldman Sachs report on the company before in 2013, in our view.

From supervision to transformation

While asset managers revamp themselves, regulators are shifting their own assignment from supervision to transforming the US investment industry in the exterior in.

That index is predicted by an analysis of the final rules by Morningstar and exchanged -traded product providers will get an additional increase; the effect on asset managers that are active will be combined; and some alternate asset managers will face new challenges. The final rules dropped an earlier list of permitted assets excluding some alternatives. But advisors will still be required to justify using choices, which usually charge fees that are relatively high, and Morningstar anticipates advisors will be “leery of using high-fee products, when under a fiduciary duty” even if they permitted.

That is another question mark by hedge funds on choices at a time of poor performance. “Any institutional investor allocating to hedge funds is examining the recent performance period attentively, ” says Lightyear’s Marrron. They may be looking to answer one question: “Whether the hedge fund model, when it comes to the fees which might be billed, is consistent with the functionality that is available.”

Under pressure: five dilemmas faced by asset managers

Business model under duress – changing the beneficiary designation

• Fee pressure is relentless and shrinking the earnings pool, likely for good.

Supervisors that are • supply no net worth and growth comes from asset-price inflation not new AUM.

• The crux of the issue is that the investment industry structure is create to help asset owners and intermediaries, not beneficiaries and asset managers.

Relationship matters – winning and retaining clients

• Customer experience/understanding the individual touch is vital. Presentation and persuasion skills are more crucial than ever and the role of consultants increase.

• But for institutional managers in the new universe – it’s about execution for productivity increases, marketing effectiveness and jobs that are moving to lower-cost locations.

The regulator’s efforts to reshape the US individual retirement investing marketplace pat into societal questions about the worth of investment managers. The conventional wisdom in the US to ask why, if the business is so successful, there are a lot of pension funding shortfalls at defined benefit (DB) plans, and such little balances in the defined contribution (DC) accounts of the majority of Americans. On increasing the collective yield accessible to investors that own securities in a sustainable way but the assignment of investment management is being refocused.

Hodgson suggests replacing fees with a flat fee arrangement in which investors purchase a slice of a supervisor’s capacity as a proportion of asset values. Managers might find this arrangement appealing in light of long-term strength flows. Assets in DB plans are flowing out of the sector as strategies go into net distribution status, and the contribution rates of new DC plans are not too high to create offsetting asset inflows, he explains.

And the prospect of flat equity returns and falling bond prices means supervisors will not manage to rely on asset price inflation to boost revenue and profits. BCG reports that in 2014, institutionally – assets increased by just 8% and revenues by only 3% – while their gains shrank 1%.

Technology –
Nowadays industries look to technology as a way to reduce costs. In asset management, technology has made considerable cost savings through operational improvements and outsourcing back office functions. Now technology has been used in two new areas – client relationships and the investment procedure.

Worldwide asset servicer State Street plans to reflect new light on the digital files associated with the group’s $27trn of customer assets. The goal will be to use data analytics to glean new, real time insights from the transaction data and other information in its computer systems. State Street’s previous technology initiative reduced costs by $625m through a personal cloud and automation of procedures that resulted in 4,000 job cuts.

Analysts view the new programme with cautious optimism. State Street faces pressure on its net interest margin, and although the sales opportunity is vague”, Goldman says “we see value in this kind of innovation for State Street’s customers”.

Relationship matters

Whatever their product focus, asset managers now face a future in which attaining growth will require companies to differentiate themselves by showing value through pricing, sales activity and marketing campaigns. Oftentimes, says BCG, “winning supervisors will gain edge by developing and deploying sophisticated capabilities in data driven decision-making”.

While digital capabilities are getting to be essential to compete in 21st-century asset management, for institutionally-driven supervisors the individual touch will remain – and maybe take on more significance.

New research from Greenwich Associates demonstrates that topnotch persuasion and presentation skills will be more critical than ever for investment managers seeking to build relationships with advisers, who are tightening their management of institutional assets.

Formal meetings with investment advisers are frequently make or break occasions Greenwich says, for asset managers, as 86% and 92% of institutional investor relationships are intermediated by advisers in UK and the US .

European asset managers may have a story to tell that would make any investment team welcome in a consultancy conference room.

A Goldman analysis of Lipper fund data indicates that 65% of European equity funds benchmarked against the Stoxx 600 outperformed in 2015, and through early April fund managers quantified against the Stoxx 50 index revealed a talent for creating alpha software, with 76% posting above-standard performance.

Performance like that just might reinvigorate active management – and put back the wind in asset managers’ sails in the procedure.

Benefits of robo advice

Benefits of Robo Advice according to ESMA

Robo advice has had a major impact on the wealth management industry. Several wealth managers have already started a robo advice alternative; others are or have a choice in development reviewing strategic options.
Measures for Wealth Managers
Wealth management companies assessing their choices associated with robo advice should assess five essential factors:
1. Alternatives will be developed in house,through a venture, or via theacquisition of a current supplier.
2 The robo advice will be placed—as a standalone offering, within a full service financial advisory program a hybrid vehicle of both.
3 Whether the company has the analytics customers and to get the tips and insights to work efficiently with them.
4 How the product will provide an intuitive and satisfactory customer expertise. That is usually reached through an iterative procedure involving prototypes, client laboratories and high-speed revisions and improvements.
5. Internal and external advertising management plans undertaken
We consider the effects that are most significant on the business, nevertheless, will come from capacities which haven’t yet. Which, although been released to the marketplace are legitimate extensions of robo advice abilities. As well as cognitive these comprise the add-on of investments besides ETFs, eventually, alternate investments such as property and hedge funds. The increase of robo adice matches up with that being indicated by business trends. More cooperation is being sought by investors and integration with their advisers. Rather than just being told how their cash is how it’s and invested performing, robo advisory gives investors a manner to connect to their advisers, raising their participation.

Benefits to financial institutions

Benefits relating to cost
Financial institutions incur fewer costs to deliver financial advice
It may be cheaper for financial institutions to provide advice through automated tools, for example because automated advice does not require the employment of human advisers, or because fewer costs are incurred from potential human errors. Although a period of initial investment is required, once the cost of system development has been met, the marginal cost of each new transaction may be relatively low, enabling financial institutions to benefit from economies of scale.
Benefits relating to the size of the potential client base 
Financial institutions have access to a wider range of consumers if they provide advice through automated tools
By providing advice through automated tools financial institutions may have access to a wider range of consumers, not only due to the relative ease of attracting a potential clients from across the EU via an online presence, but also because they can attract new categories of consumers that prefer to use online channels as opposed to face-to-face or telephone channels. Financial institutions can thus benefit from automated tools to increase their distribution platform to deliver advice.
Benefits relating to the quality of service
Financial institutions use automated tools to deliver a consistent consumer experience
Automated tools may be seen by financial institutions as a way to deliver a more standardised consumer experience by removing the potential for differences due to human interpretation.
An automated tool may also enhance the quality of the service provided to consumers by providing a direct link with current market or other relevant data. Automated tools can more rapidly process large quantities of evolving data and consequently update the advice output on a real-time and ongoing basis, if needed.
The provision of advice by financial institutions is more easily auditable because automated tools are more easily interrogated
Automated processes that are documented ex ante, for example in the logic of an algorithm or decision tress, can be easily reviewed and monitored by financial institutions (e.g. by Compliance, Risk or Audit functions).  It may be also be easier on an ex post basis to interrogate decisions made by an automated  tool, which performs tasks in a highly consistent manner than decisions that have been made by a human being.
As automated tools can generate an automatic record of the information that has been captured, the decisions made, and the output provided, it may also be easier for financial institutions to maintain records of the advice process, and to provide such records, for example in the event of a consumer complaint.

Benefits to consumers

Benefits relating to cost
Consumers pay less when they receive advice through automated tools
Automation in financial advice could decrease the costs of providing advice, which might make advice more affordable to a wider range of consumers. Most automated advisers market their offering as a low cost alternative to human advice.
Benefits relating to consumer access
A wider range of consumers has access to advice through automated tools
Consumers that may not normally contact a human advisor to obtain financial advice (e.g. because they feel that they are not wealthy enough to consult a financial advisor, or that the advisor is not objective enough) might feel more confident using robo advice tools. Increasing automation may therefore democratise access to financial advice.
Some categories of users  do not have experience in consulting a human financial advisor (for example, younger consumers, or less affluent consumers where the cost of financial advice may not be worth the benefit of the advice provided). These consumers might feel that robo advisory tools, which can also offer financial advice at a lower cost and with limited investment of time, are more accessible than advice provided by a person. This might give some investors greater motivation to act upon financial matters that they would not if they were using a human adviser.
Consumers have access to a wider range of service providers using robo advice tools 
As automated financial advice tools are usually available online they more readily facilitate cross-border transactions, compared to human advice. This makes it easier for consumers to access a wider range of advice providers, including from other jurisdictions.
Consumers obtain financial advice in a faster, easier and non-time-consuming way
Because robo advisory services are available online 24 hours a day, 7 days a week, and are aimed at reaching a wide range of consumers, consumers may feel that automated tools that provide advice are easier to use than a human adviser. For example, online automated tools may present information to users in a short and digestible way. It also usually takes only a few moments after an initial questionnaire is answered by the consumer before the advice is obtained as a result of the underlying algorithm.
Benefits relating to the quality of service
Consumers receive more consistent advice when they use automated tools 
A well-developed algorithm may be more consistently accurate than the human brain at complex repeatable regular processes, and in making predictions.  Robo advice tools could therefore reduce some elements of behavioural biases, human error or poor judgement that may exist when advice is provided by a human. A well-developed algorithm could ensure equal and similar advice to all investors with similar characteristics. This might improve the consistency of advice provided, regardless of the investors’ geographical residence or ability to identify and access a quality human adviser.
Robo advisory tools may also enable users to receive advice without feeling pressured or led as a result of personal relationships. Without the human interaction with an advisor, some consumers may feel they can take their decisions more freely and objectively.
Consumers obtain advice based on the most up-to-date market information when using an automated tool 
Because robo advisory software tools are able to rapidly process large volumes of complex data, it is possible for an automated tool to quickly assess and reassess the recommendations it makes against current data, on an ongoing basis. For example, robo advice tools can incorporate market changes continuously, to provide real-time, personalised feedback to consumers. Human advisors may find it more challenging to be as constantly up to date with relevant market developments.
Consumers find it easier to keep a record of the advisory process
The use of robo advice tools allows investors to easily receive and retain the details of their financial transactions online. For example, as robo software tools systematically record all the stages of the advisory process, they can easily provide a print out of the questions and answers which lead to the recommendation. This may help users in the future, for example if they have a query about the advice provided

Robo-advisers are systems that use algorithms to handle users’ investment platforms. And they may be threatening to upend the tremendous wealth management business that is international.

BI Intelligence predictions that robo-advisers will handle around 10% of overall worldwide assets under management (AUM) by 2020.

In a fresh report from BI Intelligence, we examine the marketplace for robo-advisory services, the motorists behind consumer adoption of robo- guiding the robo-adviser marketplace presents a chance to wealth management businesses that are conventional, and how startup robo-
As substantial legacy businesses start offering their own services counselors can triumph.

Big riches supervisors that are incumbent will not lose out to startups like Wealthfront and Betterment. Rather, they establishing their own products, which are scaling fast and are adopting the technology.
Consumers across all asset types are open to robo-advisers — such as the rich. 49% of the group would consider investing some of the assets using a robo advisor.
Many assets managed by robo advisers will come from those who have some investments.

Startups will have to identify their products to triumph, and are likely to find it hard to scale. They may be doing this by supplying riches managers with white label services, and more customized stand alone options.

Next steps for robo advice
We believe that robo-advice will, however, finally have an outsized impact on the wealth management business. The capabilities will, for instance, accelerate the process of fee compression which is already affecting the industry. The lower cost for robo-guidance services probably will put pressure. Wealth management companies must keep a close attention on methods to automate processes and transactions that are currently performed manually and on operating costs.
Robo advice may also give accessibility to a big new marketplace of millennials who are interested in amassing wealth, but have had only limited choices when it comes to investment management to wealth management firms. As these individuals develop and assemble assets (through their own efforts and through inheritance from their boomer parents and grandparents) they can represent an important growth opportunity for wealth management companies.
Ultimately, improvements in technology— particularly in cognitive computing and “smart machines” capable of complex reasoning and interaction with people — will transform the investing landscape in ways that are potentially disruptive. For wealth management firms, robo-guidance services can be a bet on the future — a method to get customers and financial advisors acclimated to working with machines that can enhance and expand human operation.
The time to think about this new FinTech wave, and prepare for it is now.