The usage of Artificial Intelligence (AI) has been raised throughout the world from smart devices to the well-known Siri application on Mac gadgets; AI is everywhere, even though wealth management and the finance field follow a more conventional path, which does not mean that they are exempted from such trends.
The latest integration for AI is Robo Advisory in Wealth Management.
While some may be apprehensive about such science-fiction
tactics to the financial system, those robots have the strength that transforms
into a wealth management approach.
Moreover, AI robots are increasingly being used by the
millennial generation to maximize their investment returns and tackle diverse
financial requirements effectively.
By utilizing this fintech strategy, advisors and wealth
managers can look forward to creating accurate financial plans for their
clients while delivering stellar service.
Understanding Robo-Advisory strategy
In simple terms, Robo advisors are software products that
assist in managing investments without a financial manager’s input. This
software works-off of an algorithm that drives financial planning services
without much human supervision. All that needs is to access a web or
cloud-based device to access this digital wealth management platform.
Since 2008, the rise of Robo advisors taken the world by
storm, at first, this fintech development’s primary purpose was to rebalance
assets as a way for investors to manage inactive statements.
During this time, Robo-advisors are only used by wealth
managers. This software is now available for clients to mimic the tactical
strategies they would see with a human service. Thus, remembering this
maintaining a self-automated portfolio that makes easier when facts and figures
In addition to this notable technological growth since
2008, the total assets under management are predicted to increase too
seriously. By 2020, Robo advisors will account for one trillion dollars on
asset management. This figure is predicted to increase to 4.6 trillion dollars
by the end of 2022.
How do they work?
The Robo advisors will collect clients’ information
regarding their financial situation with their goals and investing interests
through a real-time survey.
By this, the software will release an invoice of relevant
financial solutions based on the programmed-algorithm.
After the conclusion of the online survey, this software
can offer the following features:
- Tax-loss harvesting
- Goal planning
- Account services
- Portfolio management
- Automatic asset
- Investor profiling
- Digital advice
- Retirement plans
Furthermore, once the funds are finished, a client’s
portfolio is automatically rebalanced, aligned within the desired target
This approach has proven to be a lower-cost approach to
Benefits of Robo Advisors in Wealth Management
Being on the verge of such significant technological
alterations, wealth managers would somewhat approach Robo advisors with
caution. AI brings such promises for financial advisors that look forward to
reaping the existed benefit.
Transformation with Competitive-edge
The financial system industry is a highly competitive
space with more firms that establish, own, and adopts new fintech technologies
that are always updated.
On top of this, one cannot ignore digital advancements
that play a significant role in investment management solutions.
Whether you are targeting young or experienced and savvy
investors, providing easily accessible applications is vital.
These days are accessibility and ease of use are crucial
in any service offering. With Robo advisors, clients can access their
investment portfolio 24/7 and enter and exit positions with the click of a
Increases Profile Accuracy & Mitigates Fraud
One of the critical factors that undergo a successful
financial organization is correctness and acceptance.
For machine learning and cloud-based applications, the
chances of deviations are reduced.
In terms of machine learning, the client’s data can be
easily collected to shape accurate alert detection and reduce fraudulent
When Robo advisor technology is accessed on a mobile
device, data such as location and activity behavior can be continuously
When an irregular action is taken on a device, fraud
systems can accurately investigate where the transaction went wrong.
On the human side, the most significant benefit is that
it reduces the need for manual input.
Enhanced Financial System Portfolio
By combining both human and robot financial advisors’
best, clients can access proper portfolio management protocols.
Robo advisors run off algorithms that choose the optimum
investment portfolio based on their goals and financial situation. It makes it
safer for more strategic portfolio chances.
When it comes to any investment opportunity, face-to-face
contact is often preferred.
However, Artificial Intelligence offers users the
groundwork with their facts by considering them as a high priority before
making firm decisions. It contributes to success in gaining your client’s
belief. Also, improves the accurateness of investing in amounts.
Costs are Low for Robo Advisors
The main advantage of utilizing Robo advisors from the
client’s perspective is that it provides a low-cost alternative to traditional
investing. Through the elimination of human labor, rates and fees are therefore
In general, when looking at AI, there was an intense fear
of robots that takes worldwide and job execution.
However, we are more comfortable with Siri, Google Home,
and Alexa; AI is becoming a part of our everyday lives.
For financial managers who want to stay ahead of the game and continue to provide a complete service for their clients, integrate Robo advisors into their strategy is highly recommended.