TIME: It’s happening
Regions: Everywhere
Robo-advice is one of the key applications of artificial intelligence (AI) for financial advisers. It is now being used to create sophisticated algorithms with outputs that can interact with people through devices, such as Amazon’s Alexa, and the plethora of mobile apps that put even the most complex products at people’s fingertips. These are shaping consumer expectations of how they can interact with businesses, and buy goods and services.
It has already made an impact, especially through mobile apps. This is appealing to people with modest assets because the fees are not as high, it is easy to use and investors often feel they are more in control. They may also feel nervous about dealing with financial advisers, partially because of the fear of being sold to rather than advised.
Robo-adviser start-ups Betterment and Wealthfront have each attracted hundreds of millions of dollars in funding and now boast more than $10bn in assets. That has not gone unnoticed by established firms, a growing number of which have launched their own robo-advisory services.
Not all forays into robo-advice have been a success, however.
Investec closed its Click and Invest robo-adviser service early this year after reporting losses of £32m over the course of two years. In a statement, Investec admitted: “The reality has been that the appetite for investment services such as ours remains low and the market itself is growing at a much slower rate than expected.”
Other large financial institutions have had less trouble attracting clients. Vanguard says its robo-adviser service now has 20 million clients and some $130bn in assets under management.
There is a market for robo-advice and it is going to grow – but it will need the right propositions to succeed.
