While not everyone is yet happy to hand over the management of their wealth to computers, their ability to offer consistent, relevant advice will eventually win the day, writes Aggie Anthimidou, wealth management strategy at Temenos
This is a summary of 'The March of Robo Advisers' article published in Private Banker International.
Many have grasped the role digitisation and data can play in improving the services banks offer to high net worth individuals – and for that matter to customers looking to invest even small sums.
Robo advice is when software offers advice or even manages assets on a discretionary basis, and it is playing an increasingly important role in wealth management services. Its attraction lies in the ability of algorithms to crunch far more data than a human to come up with consistent, relevant advice and produce personalised financial planning and asset allocation, and rebalance portfolios.
While the industry believes that robo advisers are a step forward in wealth management some customers aren't quite there yet. And the recent Forbes/Temenos insight survey "The Rise of Bionic Wealth" appears to back this up.
The survey found that wealth managers are ahead of their clients when it comes to understanding the value of digital and robo advisers and there was a significant swathe of clients – 21% - unaware of their very existence. But encouragingly, 30% of clients believe that they are "essential because technology is the best way to manage a portofolio".
But while fintechs are disrupting the market, established wealth managers have a real advantage, according to Pierre Bouquieaux, Temenos' private wealth management product director.
"Wealth management has a real advantage over the fintechs: the relationship they already have with their customers and the amount of data they hold on them. It's a highly valuable resource and digitisation will allow them to leverage this data and provide a better service," says Bouquieaux.
There are areas where human advice is always likely to be preferred – inheritance planning, retirement and tax being three obvious ones. And for some, there will always need to be considerable hand holding before they are comfortable with a computer managing their wealth.
What is certain that as the tech savvy generations take control of their inheritance and or make their own fortunes they will help drive the robo advice market forward. A robo adviser's sheer ability to crunch the data to always offer the best advice will convert the doubters. At the end of the day it's all about data management...
View the full article in Private Banker International.