Traditional human wealth advisers are losing their appeal, with algorithms and robo-advisers taking their place. The shift is fuelled by the 2008 financial crisis, which eroded trust in the financial industry, and the advent of new technology. Robo-advisers are not only cheaper but also arguably more reliable, as they are not swayed by emotions or personal biases.
These digital advisers use algorithms to build and manage a diversified portfolio based on the client’s risk tolerance and investment goals. As they require minimal human intervention, they charge a fraction of what traditional advisers do. The trend is particularly popular among millennials, who are comfortable with technology and sceptical about the financial industry.
Despite the rise of robo-advisers, human advisers are not entirely obsolete. They still have a role to play in more complex financial planning and for clients who prefer a more personalised service. The future of wealth management may well be a hybrid model, combining the best of both human and robo-advisers.
Regulation could be a hurdle for robo-advisers, especially as they expand into more complex financial products. Regulators are yet to catch up with this new technology and there are concerns about how these digital platforms would handle a financial crisis.
Go to source article: http://www.economist.com/news/special-report/21650292-human-wealth-advisers-are-going-out-fashion-ask-algorithm