Putting Your Wealth in the Hands of Robots

The growth of FinTech has modernized many financial firms in the past year. Ever since start-up FinTech companies such as Betterment and Wealthfront began introducing the efficiency of “robo-advisors,” financial firms have been pouring funds into the modernization of their infrastructure in order to keep up with the digital age. Robo-advisor services have gained popularity within the investment industry for the past five years. Although wealthy individuals believe that it is necessary to handle their accounts in person, oftentimes, most individuals manage their assets/investments at home and would prefer to be advised online rather than have to visit the branch directly.

In the wealth management sector, FinTech companies have developed robo-advisor services for the sole purpose of giving customers a faster, cheaper, and more automated experience for managing their wealth and investments. These algorithm-based online services allow customers to receive fast, automated advice at the click of a button. The development strategies that most of these startups deploy are centered around low-cost and automation techniques. As seen in Schwab Intelligent Portfolios, their marketing strategy entails the following: “Pay $0 advisory fees, account service fees or commissions — and you can get started with as little as $5,000.” The main motives of companies like Schwab, Betterment, and Wealthfront is to offer inexpensive services to show customers that they can receive the same quality advice for lower fees.

Although these companies have gained praise for their efforts recently, many critics of the robo-advisor platform have come to the conclusion that the market for robo-advice is not investors currently working with a human financial advisor, but rather those who are handling their investment management on their own. In order to expand the market further, robo-advisor services must deal with two issues: 1) strengthening the client-to-robo-advisor relation and 2) ensuring that cyber security is a priority especially when issues arise.

All in all, the future for robo-advisors is still foggy. Although FinTech companies have began to seek out better marketing strategies for robe-advisor services, the uneasiness that most individuals feel in regards to technology managing their personal accounts might not subdue. The future is in the hands of those who choose to humanize artificial intelligence.