The Strategist

Robo-Advisers Encroach On Financial Market

03/08/2016 - 07:33

The practice of computer-aided development of investment strategies (robo-advising) is becoming more common in the financial advisory market. As follows from the analysis of the Swiss company MyPrivateBanking Research, the share of assets controlled by computers will rise to 1.6% by 2025. Over the last year, the volume of assets increased from $ 19 billion to $ 43 billion.

Iman Mosaad,
Iman Mosaad,
The hybrid form of counseling sphere (when people complement the recommendations of computers) will develop even faster. The volume of assets managed trough such investment strategies may increase over the same period to $ 16.3 trillion (about 10% of the global investment portfolio), said MyPrivateBanking’s report.

Even the largest British banks - Barclays, Royal Bank of Scotland, Lloyds and Santander UK - are already developing robo-advising services. Such services for financial institutions are becoming increasingly attractive because they can provide affordable consulting services to a large number of clients.

However, such systems have their own risks. Some users may not fully understand the workings of a fully automated service, so a hybrid version of counseling may be more preferable, said Peter Tyler of the British Bankers' Association. In addition, financial markets may become unstable if many players have the same strategy. In addition, there is danger of virus penetration into computer consultants to make them give wrong or identical advice to various types of players.

New types of counseling can also greatly affect work of asset managers themselves. They are already under pressure from regulators, and lower fees may improve competitiveness of robo-consultants. Especially that some investment companies and banks, such as Credit Suisse, already use computers for writing reports and summarize information.

"I do not think that [computer consultants] will replace the private capital management in the coming years - the FT quotes Francis Groves, MyPrivateBanking’s analyst. - However, a significant proportion of wealthy clients will use some form of hybrid consulting and many asset managers will have to adapt to it."

Lee Goggin, co-founder of Find A Wealth Manager, which helps people find asset managers, does not exclude that his platform can present services of Computers Consultants in the course of time. "We believe that the robo-advising can be an invaluable solution for those retail investors for whom the services are too expensive", - he says. And yet, says Goggin, the robots will not be a panacea for independent investors and will not be the best solution for rich people.