The old days of private wealth management may be coming to a close. That’s not to say wealth management is fading away, no instead it is modernizing and growing faster than ever. This is thanks in part to the continued automation of the industry, the latest new technology being robo advisors.
Now, robo advisors are not entirely new. We’ve heard of them before as they started popping up as recently as 2014. Four years later though they are gaining in popularity and importance. Recently things have sparked as robo advisors are flooding the market thanks to major players like Betterment and Wealthfront. Providing lower cost solutions, granularity, and a hands-free strategy makes them attractive options for new investors who may be weary of high fees and not sure where to start. The premise is that asset allocation, the amount of your portfolio that you have in Stocks, Bonds and Cash, are the greatest drivers of investment performance, not the magician stock pickers. So investors should determine what level of risk they can tolerate and a algorithim in the Robo advisors can create a portfolio of low cost index funds that match the investors risk tolerance,
Our take: this is good. Increased competition means a more balanced market of options, as a wealth manager ourselves our aim is to innovate along with the industry to provide modern high tech solutions to a new set of customer demand. Robo advisors are not some sort of Skynet bent on taking over our financial system. They’re a lower cost, automated way to protect and plan your financial future.
Black Rock is taking Skynet into reality with their ROBOT advisors. Black Rock’s Robots
The firm is starting a suite of ETFs under the “iShares Evolved” brand. The funds will pick their holdings in industries such as technology, innovative health care and media entertainment based on machine learning and natural language processing, according to a BlackRock statement. It is all about the data and he combination or AI, and technology that allows them to provide systematic active equity at fraction of the price of active management.
Ultimately this means options.
You’re not limited to a private wealth manager in your city or state. And you’re not limited to a firm that will take you based on your disposable wealth you want to invest. Instead you have an internet full of options at your disposal. Not one to be outdone however, many robo advisory firms are going after wealthy clients, hoping to poach the business of established firms who bring a personal touch.
Both Betterment and Wealthfront are offering services for those with more than $100,000 to invest.
This is a major shift from their initial stance on seeking lower net worth individuals with minimal experience, though is undoubtedly a move driven by the desire to land more capital and a larger brand name.
What happens if/when they succeed? It means a new time of investment landscape and a lot more competition that’s what!
What this means for advisors
Large firms such as Morgan Stanley are starting to jump on the robo advisory bandwagon in an attempt to keep up. Staying par for the course isn’t the only reason wealth managers are joining the ranks of robo advisors however.
A larger pool of potential clients is a major factor, as well as the ability to provide a high tech solution at little to no touch from the firm. This frees up wealth managers allowing them to scale up their book of business and spread their brand furthering competition. Robo advisory services are no longer a whisper at a financial conference or an article on Tech Crunch. They’re in the hands of the mom and pop shop down the street that is looking to join the ranks and usher in the 21st Century.
At M3 Wealth Advisors our mission is always to protect and preserve your wealth. In order to do that we offer strategic partnerships with online automated solutions to help you get a premier automated experience without having to leave your desk at home. All it takes is the courage to take the first step, which you can do in as little as five minutes by filling out a risk profile questionnaire here: