Pressure is mounting among players in the wealth management industry as reports indicate that many investors are quietly turning to robo-advisers as the preferred method of managing their investment portfolios.
According to experts, the shift towards robo-advisers has been occurring for some time now. Masood Vojdani of MV Financial, a wealth management firm in Bethesda, says that many of the people who are now using robo-advisers are young investors who mostly belong to the millennial generation.
‘These young people prefer robo-advisers to traditional human wealth management individuals for obvious reasons: that robo-advisers are more accurate than humans and that using them sounds more tech-savvy that using human advisers is,’ he says.
According to a research conducted by Spectrem, a wealth management firm, back in 2015, three out of every five investors interviewed indicated their willingness to turn to robots to help them invest their money.
The reasons that many of the respondents provided regarding their preference for robots to humans as financial advisers range from the belief that robots are cool and less prone to human errors to the observation that robots are less costly that humans.
Many investors have remained concerned about the high amount of fees that wealth management firms charge for their services.
Although many wealth management firms charge fixed amounts of money as percentages of the portfolio that they handle, to many investors, wealth management firms earn a lot of money in the process of providing their professional services.
It has been reported that many wealth management firms are in the panic mode, following the revelations.
Many firms are now attempting to address the challenge of losing their business to robots. Especially, it has emerged that professionals who work in the industry are concerned because it is practically impossible for humans to compete with robots in making accurate predictions and choices.
Reports indicate that one of the strategies that companies are using to address the challenge is to restructure their service offering in such a manner that they offer clients services at lower costs than what has been the case.
It is not clear what the future holds for the millions of professionals who work in the lucrative wealth management industry, given the ease with which they stand to lose their jobs in the near future. However, observers are of the opinion that the process of replacing human wealth managers with robots may not be as clear-cut as it appears.