Should Financial Advisors Feel Threatened by Robots?
The world we live in is morphing into a new one as we speak—that’s a scary prospect for many, but after a presentation by economist and trends expert Linda Nazareth, you will feel like you have a handle on the future. The Senior Fellow for Economics and Population Change at policy think-tank The Macdonald-Laurier Institute, Linda is an expert in demographic and economic trends. Her talks focus on what will happen—and what you need to think about to be on the right side of change. Below, Linda writes on whether or not we need to be worried about the robots:
What do you think of we someone mentions jobs being replaced by technology? Maybe you flash on the automated checkout counters at your local grocery store, or you picture an assembly line powered by robots. What you probably do not figure on is one of those robots choosing stocks for you – but maybe you should. ‘Robo Advisors’ are now a thing, and more and more they will have a say in your portfolio.
Okay, it is not likely to be quite that cut-and-dried – financial advisors will not be asked to pick up their briefcases and march out of the office so that a fleet of robots can take their seats. And to be really accurate, Robo Advisors are not really robots who pick stocks. Instead, they refer to automated services that ask users a series of questions (‘what is your investment horizon?’, ‘what is your risk tolerance?’), then use an algorithm to come up with a plan that users can tweak as they would like. That done, they provide automated portfolio management services. Fees for use tend to be lower than going through an actual human advisor, which is of course a draw to many.
The best known name in the Robo Advisor game is probably Betterment, a digital investment startup out of New York that in March raised $100 million in venture financing, taking its total valuation to $700 million and making it more than a niche player. Even more significant is that the established names in finance – T. Rowe Price, Charles Schwab, Vanguard – have been making significant moves to broaden their use of computer-managed investment portfolios.