For all those who believe that God created us, how would you feel if given an option to advise him? Or rather what would you advise him? That is precisely how I feel about a robo-advisor.
A machine created by me is advising me and my fellow beings? If I am so knowledgeable and could feed it to an algorithm, I should start a training class and educate others. But no, a bunch of so-called experts meets and gathers the requirements to design it, get the programmers to code it, the QA to test it and then make it live, not to forget the ever repeating cycle of maintaining and supporting these advisors.
The funniest part is that all this comes with a cheap price tag – hiring a human financial advisor could be a costly affair. Robo-advisors may be at an early stage but do come with power to drive the change. On the one hand they could be integrated with the Internet of Things (IoT) and artifiical intelligence (AI), on the other they are also responsible for creating more jobs.
Robo-advisors need integration with AI and IoT
The aim of the launch of robo-advisors is to help low-income individuals who find it hard to hire a financial advisor. For example, if Harley Davidson launches a prototype and it is available for people at a lower rate, who wouldn’t fall for it? The same goes for robo-advisors, the great gamble of advertising with a tagline – hire your financial advisor at a low price.
The hard reality is that you are clicking some buttons, filling out the form and submitting the information for an algorithm to decide how your hard-earned money should be invested.
Robo-advisors need integration with AI and IoTs. As an individual, rather than me filling/telling what risk-appetite I have, it should be conveyed with the stuff I own. As IoTs come into the picture, one can rate whether the refrigerator falls into the luxury brand or an average brand. Even a car, television and laptop could tell a lot more about my risk appetite.
With IoTs integration and AI fed to these robo-advisors, an individual could have real-time data of assets and liabilities and how his portfolio needs to be rearranged.
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Just in the case of an emergency like a car accident happening, a car could assess the damage and send the information to the insurance firm, which could then be passed to the robo-advisor balancing my portfolio. Would that be too much to ask for?
How robo-advisors are creating more jobs
Whoever believes that automation could destroy jobs, look at how robo-advisors have created more jobs. The latest industry data from Bloomberg shows that passively managed stock mutual funds and ETFs gathered $257 billion worth of assets in 2015 compared to redemptions of $108 billion at actively managed funds.
Of this figure, pure robo-advisors are estimated to control roughly $50 billion worth of assets as of 2015, although the inclusion of hybrid firms pushes this number much higher.
With businesses making profits with robo-advisors, established companies like Morgan Stanley, Bank of America and Wells Fargo have started investing and planning in robo-advisors. In fact, many entrepreneurs are already exploring the idea beyond just advising. A new project means new hiring, new technologies, new licenses, new content, new experts, new sales, new clients and hence new jobs!
Robo-advisors are here to stay, it’s hard to believe, but we are at a juncture where technology has overpowered our brain, and every moment we seek technology to answer our quest. Be it to know the shortest route to our office, or whether it will rain. From personal to professional we all seek advice at each level…. so undoubtedly. robo-advisors are here to stay!
This article was written by Samiksha Seth, a Research Consultant and Content Strategist.