Would You Trust a Robot for Financial Advice?
Many services are being automated and often you’ll hear ‘there’s an app for that’ when talking about various strands of business. Robots, too, are taking over in the workplace. They are making cars, working in factories, performing operations, and now handing out financial advice.
Online robotic advisors are providing small investors with financial advice and managing their portfolios, with these services proving more cost-effective than their human counterparts. The rise in robot-advisors came about through concern that not enough people were getting the advice they needed at a price they could afford. Whilst they use the same software as their human counterparts, they focus mainly on managing portfolios rather than the tax and retirement aspects of wealth management.
Meet the Robo-Advisors
Robo-advice is an automated online service using algorithms to manage portfolios. Investors can go online and fill in a form with their age, ideal retirement age and whether they want their investment to be high, medium, or low risk. The robo-advisor then puts the money in the appropriate funds and automatically rebalances the portfolio if necessary. At present, they are not poaching clients from existing advisers but capturing a new market of young people with little money to invest, who may have been ignored until now.
In San Francisco, SigFig Wealth Management has 845,000 clients but fewer than 100 employees. This new generation of financial firms gives clients access to algorithm-driven tools to manage their portfolios. SigFig has become the eighth largest adviser in the USA by number of clients.
Somewhat closer to home here in the UK Ascot solicitors Parachute Law are proud to have the human touch offering advice but from a legal perspective.
Automation Makes Financial Sense
So, it seems as though robots are not a threat to existing financial firms but have tapped into a previously unseen market. In many ways robots and software can make life easier for professionals such as independent financial advisors, because a lot of their work can be automated or dealt with quickly by apps or software to leave people more time to deal with their clients.
All information about clients can be safely stored, their portfolios updated or created, and accounts managed using business management software which helps them manage risks and build a better business. This enables professionals to spend more time doing what they enjoy – giving financial advice.