Up until recently, there were only two ways of investing your money – either hire a financial adviser or do it all yourself. However, can many people trust themselves to pick the right portfolios based on their financial situation, or understand the markets well enough to know when to take action or when to sit tight? Enter the robo adviser – a solution that automates recommendations based on the information the user inputs into its system.
UBS, Vanguard, BlackRock and Goldman Sachs are all getting into the online investment business as reported by FT.com. It’s a cheaper solution that is proving attractive in the US, but where does that leave independent financial advisers?
Robo advice is still in its infancy. At the moment, its algorithms can only cope with investors whose financial profiles fall into one of a few simple categories, such as an individual looking to put money aside for their retirement. Not only that, recommendations from a robo adviser is only as good as the information that was inputted into the system by the user, and so it’s possible for a user to receive incorrect advice.
A new opportunity
Inevitably, the robo advisers will become more sophisticated, and this is where investment advisers can seize opportunity. By offering robo advice as part of their service, investment advisers can potentially attract customers that might not normally pay for full investment advice but may use robo advice as a stepping stone to taking advantage of a fuller service on more complex issues like personal tax advice, for example.
Existing clients might take the opportunity to use the robo service, which in turn frees up more time for advisers to concentrate on giving the personal advice where it is most needed, and of course, growing their business.
Robo software, coupled with back office systems for financial advisers from developers like https://www.intelliflo.com/ means a potentially larger client base for those who are willing to embrace robo advice. In fact, firms in the US that offer a combination of robo and human advice are proving more popular than firms offering robo advice only.
It seems robo advice will never match or replace the quality of investment advice provided by a qualified financial adviser. Far from becoming an endangered species, financial advisers will continue to thrive.