21 June 2016
Robo-advice is a fintech service that everyone is talking about, but what exactly is robo-advice? Allow us to break it down for you.
Robo-advice (also referred to as ‘automated investing’) describes an online wealth management service that provides automated, algorithm-based investment or portfolio management advice without the use of human financial planners.
Put simply, robo-advice is an automated computing software system that does all the hard work for you. Robo-advice is typically low cost and has low account minimums, which attracts younger investors who are more comfortable doing things online. Robo-advisors are a genuine threat to disrupt segments of the vast global wealth management industry.
The leading wealth managers in the space won’t necessarily lose out to the novel startups, as they embrace new technologies and launch their own products. Startups in this space will need to differentiate their products if they wish to succeed, some which already are by providing white label services to wealth managers, and more customised stand-alone solutions.
Why use a robo-advisor? They are affordable, efficient and accessible. And their popularity is going to grow further, if new projections are accurate. Assets under management by robo-advisers are estimated to increase 68 percent annually to about $2.2 trillion in five years. About half of that is expected to come from money that's already invested and the rest from non-invested assets.
In a recent report from Business Insider Intelligence, it is noted that robo advice isn’t just for the middle class earners. It is attractive to the wealthy - 49% of them would consider investing some of their assets using a robo-advisor. Robo-advisors are here and seem to be the way of the future, reaching out to a wider range of people than financial consultants ever did. So, will you be getting robo-advice anytime soon?
More information on the BI report can be found here: