Robo-advice, a form of automated financial advice, is transforming the asset management sector. With increasing adoption, it is predicted to manage $2.2 trillion globally by 2020. This digital revolution is driven by cost-effectiveness, with robo-advisors charging significantly less than traditional advisors. Moreover, they offer a high degree of personalisation, using algorithms to tailor portfolios to individual risk profiles and investment goals.
Despite these benefits, robo-advice is not without its challenges. Regulatory issues, such as the need for transparency and accountability, are significant. Additionally, robo-advisors may struggle to manage complex financial situations, lacking the human touch that can interpret subtleties and emotions. Consequently, they may be less suitable for investors with complex needs.
A hybrid model, combining human and robo-advice, is emerging as a potential solution. This model offers the efficiency and personalisation of robo-advice, complemented by human insight for complex decisions. The hybrid approach could be especially attractive to millennials, who value both digital convenience and human interaction.
As robo-advice continues to evolve, it is clear that asset management is on the cusp of dramatic change. The sector must adapt to this new reality, embracing the opportunities and addressing the challenges that come with it.
Go to source article: http://blogs.lse.ac.uk/businessreview/2017/10/13/robo-advice-in-ten-points-asset-management-on-the-cusp-of-dramatic-change/