Bots killing off financial advisors?

Analysts predict the robo-advisor market could grow to $2.2 trillion in assets under management by 2020

Before Bernie Sanders blazed his way into the hearts of millions, the most famous man previously connected to the name Bernie continues to sit in a prison cell after bilking $65 billion from his clients via an elaborate Ponzi scheme. You know him as Bernie Madoff — the worst investment advisor in history — the man who made the word ‘Ponzi’ a household term and forever sullied the reputations and trust of investment advisors worldwide.

Robots to the rescue? Just as aggressive foreign policy and religious fanaticism created terrorism, shady investment bankers like Madoff have spawned robo-advisors, removing the human equation from the investment transaction entirely. What is a robo-advisor? It is a software program that uses a series of algorithms to do exactly what human financial advisers do, but much more cheaply and without the threat of human greed. Investors can now play the market without the human overhead.

The robo-advisor market, driven by startup companies like Wealthfront and Betterment, grew so dramatically in such a short time that robot development is now a key focus at the biggest financial institutions. Bank of America, Wells Fargo and Morgan Stanley are all scheduled to roll out robo-advisors later this year, while others like Vanguard are now testing limited rollouts. All told, analysts expect the robo-advisor market to grow to $2.2 trillion in assets under management by 2020.

Does that mean a robot will replace a human financial advisor in the coming months? Should financial advisors start looking for new careers? Is the financial advisor going the way of the travel agent? The easy answer is yes, but I would argue that, from a bank’s perspective, there are a couple of potential negative outcomes from only employing robots. The first potential pitfall is that all software programs are written by humans. What if those developers have a criminal intent and build something that does essentially what Madoff did?.

The second argument against a robots-only approach is that a robot can never relate with a client’s needs and desires like a human can. Body language, including signs and gestures, sometimes speak louder than words; a human can decipher them, while a robot cannot. In addition, those advisors with significant industry experience — who currently serve as coaches, information sources and prognosticators — can never be replaced with technology, nor can their institutional knowledge. These consultants will always have a job — their younger, less experienced counterparts, on the other hand, could fall victim to the Uber-ization of the financial industry.

Marc Lussy, a UK-based former wealth management trader turned independent adviser on the digitization of the financial industry, and a partner at Investment by Objective, shares this view. In an article published in, he stated:

“There’s a lot to suggest that the development of technology will fuel the trend away from relationship managers with a very broad portfolio of duties. The job will likely turn into a kind of trusted partner: a person who persistently concentrates on his core competences and who acts as a confidante and even coach to his clients. Today’s adviser profile likely will disappear slowly. But I don’t believe that the majority of advisers be replaced by robots.”
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