Automation is coming quickly to the asset management industry. Computer-driven online investment advisers, known as “robo-advisers,” are proliferating. The Vanguard Group’s virtual advisory platform alone has attracted nearly US$50 billion in new investments over the past three years.
A casual observer might assume that the traditional money manager is an endangered species. Instead, industry experts argue that automation could lead to a more personalized investment experience combining human expertise with technological wizardry.
“In the end the most powerful combination is integrated solutions, which combine discretionary investment advice and automation to improve the customer experience,” said Philip Watson, head of the Global Investment Lab at Citi Private Bank, where his department oversees the creation of innovative financial strategies.
RISE OF THE ROBO-ADVISERS
Watson notes that technology-driven disruption is commonplace in the financial industry. What is different now is the rapid rise of robo-advisers, artificial intelligence (AI) computer algorithms that create a custom experience at an affordable price.
“The fledgling robo-advisers are gaining traction,” said Amin Rajan, CEO of CREATE, a UK-based think tank focused on trends in global fund management. “Today they manage nearly US$90 billion worldwide, and this figure is expected to increase fivefold over the rest of this decade.”
The reason for the rapid advance of the robo-advisers is simple: cost and convenience.
“Within minutes, robo-advisers allow you to set up customized, diverse portfolios and can give you access to wealth management services previously reserved for the ultrawealthy, like tax-loss harvesting and access to a certified financial planner,” Joy Blenman, a financial columnist, wrote recently on Investopedia, a leading financial website.
Rather than rushing to automate, however, the industry has opted for a more nuanced merging of human and technological strengths. In January 2017, for example, Betterment LLC, an online investment advisory service based in New York City, announced plans for a hybrid investment service that combines robo and human advice. Two months later, US-based discount brokerage Charles Schwab launched Schwab Intelligent Advisory. The service provides unlimited access to human advice via phone or video, along with investment portfolio suggestions generated by computer algorithms.
BALANCING SPEED WITH PERSONALIZATION
In its 2016 FinTech survey “Beyond Automated Advice,” global business consulting firm PwC predicted that automation will create a more tailored customer experience.
“New, accelerated online platforms and applications improve the retail customer experience by providing bespoke but affordable services to help investors set their investment goals, choose the right product or service and manage their investment portfolios,” the report states. “Forward-thinking AWMs [asset and wealth managers] will be able to find the right mix of technology and personal touch for a given customer segment.” For Watson, this combination is merely an extension of the skill-merging commonplace in the financial industry.
“In the past, the model frequently relied on information advantage through [human] teamwork,” Watson said. “For example, a PM (portfolio manager) and research analyst, a team operating across regions, a relationship manager and an investment adviser – all providing incremental value. Automation can be thought of as extending that path with human plus AI, rather than AI alone.”
“THE MOST POWERFUL COMBINATION IS INTEGRATED SOLUTIONS, WHICH COMBINE DISCRETIONARY INVESTMENT ADVICE AND AUTOMATION TO IMPROVE THE CUSTOMER EXPERIENCE.”PHILIP WATSON
HEAD, GLOBAL INVESTMENT LAB, CITI PRIVATE BANK
Automating the routine portions of customer service should actually help to increase the service that customers receive by allowing human advisers to off-load routine tasks.
“The more accessible our digital interface becomes, the faster we can connect customers with the answers they are looking for, using services such as accentuated voice recognition and secure technology,” Watson said. “This is more efficient for customers and also more efficient for relationship managers, who can focus on higher-level analytical activities.”
TECHNOLOGY AND TRUST
The future for automated asset management, experts agree, will depend on both technology and trust.
“Markets, products and customer needs will continuously evolve,” Watson said. “As such, there will always be a need for humans.”
For robo-advisers to succeed, however, consumers must feel well-served by the combination of human and automated advice.
“Trust remains an ever-important need in any decision-making process,” Watson said. “The provision of high quality, personalized advice based on holistic solutions with a human touch will always be advantageous.”
Discover customer-centric solutions for financial services at: http://3ds.one/FBS