Nothing succeeds by standing still, and that includes robo-advisers.
The first robo-advisors, which emerged in the aftermath of the 2008 financial crisis, were successful in responding to young consumer demand for technology that can provide financial advice and a cheaper way to start investing. The growth over the years has been significant – assets under management in the segment are expected to reach $ 1.3 trillion this year, according to Statista.
While originally aimed directly at consumers to bypass the traditional wealth management industry, over the past decade robo-advisor technology has evolved to meet the needs of users and the industry.
New audiences and preferences
Traditionally, wealth management programs have targeted people over the age of 50, as that is where most of the assets are located. Since wealth managers are paid based on a percentage of assets, it makes sense that they focus on large accounts. However, these strengths have started to be passed on to the younger generations.
These young audiences often have different investment priorities from those of their parents and grandparents. For example, the younger generations tend to value more responsible investment options. Many robo advisers have added environmental, social and corporate governance (ESG) investment options to give these investors more opportunities to invest according to their beliefs.
In addition, mobile capabilities are essential to attract the younger generations. Having an automated investment advisor isn’t as appealing to millennials or millennials if they can’t access their investments through their smartphones. Robo-advisers have also added different types of accounts, such as custodial accounts, to introduce more options and better coverage, regardless of investor preferences.
Keeping abreast of technological developments is another way robot advisors have sought to remain useful. Some investment apps are provided by third parties and require additional work on the part of the user to connect bank accounts and make transfers. Providing everything on the same platform makes it easier to access and manage investments. Banks and credit unions have a real advantage here, as offering automated investment management through online and mobile features makes the process much easier and safer for the user.
Automatic portfolio rebalancing options can also help investors stay focused. Likewise, many robot advisers have added the ability for users to update their preferences as their lives and goals change. An increase in income, a career change or even reaching a new stage in life like getting married or expanding the family can lead to changes in investment goals. Investment solutions must be able to adapt easily and easily when investment objectives change.
Going forward, the growing sophistication of AI and machine learning may offer robo-advisors the ability to meet more complex investment needs or consider a wider range of characteristics and appetites. for investor risk.
Time to evolve
Due to the way they have adapted and innovated over time, the popularity of robo-advisers continues to grow. In a recent Access Softek poll, 47% of those polled said they would consider switching banks or credit unions if the competitor offered integrated investment accounts.
Consumers appreciate the ease and convenience that this type of solution can offer. Being digitally native, it can operate outside of normal business hours to accommodate any schedule. And automatic investment management reduces the stress associated with browsing the stock market.
Robo-advisers should not be seen as a complementary service, but as an integral part of a financial institution’s digital strategy. Adding a digital investment service with a low barrier to entry creates more points of contact for the consumer and their financial institution not only to engage, but to build a lasting relationship.
Robo-advisers aren’t new, but they’re more useful to today’s digital-first consumer – and increasingly digital financial institution – than they were when they were first created. Any solution or institution can learn a valuable lesson from the evolution of robo-advisers: innovation is the key to long-term viability.