Over and over we keep hearing that robo-advisors are really only capable to develop simple investment strategies mostly based on simple products like index funds. For example, today Forbes carries a story that argues along these lines:
„While innovative and cutting-edge, most of today’s digitally-based offerings are still restricted to the discrete areas of basic planning and investing. People that want a more comprehensive wealth management relationship will need a broader solution, the kind that has been perfected by seasoned wealth advisory professionals.”
Well. We beg to disagree. Forbes maybe right that today’s offerings are relatively simple and restricted to basic planning and investing. But there is no doubt that software and relatively basic artificial intelligence will soon be able to tackle more complex questions. Private banks and conventional wealth managers should not rest on the assumption that high-net worth clients and their more complex financial needs cannot be supported and advised by algorithms. Computers are able to solve complex and relatively unstructured problems in such diverse areas as diagnosing serious health conditions or advising customers on buying perfect gifts. Partly this is based on big data analysis, partly on very smart algorithms. No doubt that this kind of software will at some point soon be able to solve tax problems or estate planning. Don’t underestimate the speed of innovation. Of course, there still will be a role for humans in the advisory industry. But it will change from subject expert to human coach or therapist as many clients prefer interaction with humans rather than machines.
Check out our new report on robo-advisors for an in depth look how this industry will develop and how this brings new opportunities for conventional wealth managers.