No industry is safe from the disruptive power of artificial intelligence and machine learning, financial services included. According to research from BI Intelligence, automated advising services are projected to manage around $1 trillion worth of assets by 2020 and more than four times that amount by 2022.
So does the influx of robo-advisers mean investors like you have to alter your lifetime wealth creation plans?
First things first: What changes about traditional financial advising?
Robo-advisers, robo-analysts and other customer-facing investment data analytics solutions aren't quite advanced enough to serve as a replacement for your neighborhood asset manager or financial adviser. But that doesn't mean similar technology can't complement and even enhance the financial planning experience. Here's how:
Reduced costs
Financial service providers can leverage robotic money managers to perform rote administrative tasks without manual assistance. As they do, wealth management will naturally grow more affordable because a greater percentage of advisers' time is spent actively advising.
More hands on deck
Robots see data differently than humans and a lot more of it, which makes them excellent financial planning assistants. As Quartz's John Detrixhe explained, robo-advisers can rebalance portfolios according to preset parameters agreed upon by investors and seek out tax loopholes to maximize returns, all while financial advisers continue to watch the asset performance in the market.
Balance risk and reward
For the time being, financial planning AI mostly make safe bets on investments. Think index funds. But for some investors, that's not enough. As such, robo-advisers can grow wealth in smaller incremental ways while experienced, knowledgeable advisers can offer bold opportunities to add a little oomph to wealth creation for those interested. Fortune favors the brave, right?
Robo-advising, while certainly an exciting new frontier for financial services, won't drastically change how investors today build and maintain their wealth. But given time, this technology will ultimately transform the industry, bring about innovative investment products and services and make portfolio management more reliable.
Use robo-advising to talk to your children about financial planning
It's safe to say high net worth individuals know a thing or two about investing – or at least where to go for great investment advice. Unfortunately, the millennial generation hasn't been as receptive to financial services as they should be. One Fidelity Investment survey of millennials found that although 63 percent of them do invest in some capacity, only 9 percent would "describe themselves as an investor."
Interestingly, that same study revealed that nearly two-thirds of respondents also see their parents as strong financial role models and hope to emulate their successes.
So while the wealth management landscape today isn't the same as it was 20 or 30 years ago, robo-advising sits on the cusp between both eras, making it the perfect springboard for welcoming the newest generation of investors into the fold. With help from those who already possess a great breadth of experience, families can continue growing their legacy and pass along valuable, functional investment advice by starting the conversation with easy-to-use robo-advising apps or similar products offered by financial planning service providers.
