It’s surprising how quickly the robo-advisor industry has moved from the peak of inflated expectations to the trough of disillusionment. Low customer adoption, high acquisition costs, minuscule revenue per customer, investors’ need for human support, low entry barriers for large competitors (aka the big bad banks) and complicated regulations are all big challenges faced by the robo-advisors.
In addition, unlike North America, which spawned the robo-advisor cheap jerseys nfl concept, the rest of the world is still coming to grips with the realization that personal investment and wealth management means more than buying real estate, buying and selling cars, or speculating in the stock market. Nearly half of the $80 trillion global assets under wealth management are in USA after all.
For an Uber or Airbnb moment to happen in wealth management, wealth management needs to happen first. Unfortunately, taxi riding and hotels are way more prevalent across the world than investment portfolios. In order for robo-advisors to take hold, investors need to be educated first about basic concepts such as financial planning, diversification and manic depressive nature of the stock markets. Robo-advisors also need to make sure that once bad things happen (e.g. market crashes) real humans are on standby to calm the investors down. After all, when a self-driving car crashes you cheap jerseys don’t send a roomba over to calm the passengers down. The typical robo-advisor approach, asking simple questions to build a risk profile, and sticking precooked computer matched and managed ETF portfolios down people’s throats with a neat app with pretty charts, oversimplify the problem. Wealth management needs constant client education, algorithms and humans to work together. No doubt, the current players will pivot and find the right solution(s). However, what is out there right now may be a bit premature.
Shall we keep our hopes up for the slope of enlightenment ?
PS: Great article in the Financial cheap nfl jerseys Post on this topic if you want an in-depth assessment : http://business.financialpost.com/investing/robos-are-getting-a-pass-study-points-to-service-gaps-in-automated-investment-advice