By FINTECH Books Contributor, Jukka Blomberg
Wealth management – the sweet spot of the finance industry – is about get “Uberized”. Automation will lower investment advisory fees from thousands of euros, to euros while advanced computer algorithms help investors get higher returns through strategies traditionally available only to high net worth and institutional investors.
In 2016 there were 365 million people globally whose wealth was between USD 100k and USD 1 million. Together they hold over USD 100 trillion – 40% of global wealth. Yet a vast majority of them don’t qualify for advanced private banking services. They are typically offered standard investment products, which deliver unsatisfactory returns and carry high costs.
Robo-advisors automate premium investment advice, lowering the costs and expanding the addressable customer base. These services can be accessed through web and mobile apps anywhere, anytime – as expected by today’s investors. Advanced computer algorithms along with artificial intelligence bring international investment strategies – traditionally available only for high net worth and institutional investors – to the masses, democratizing the investment scene.
This is also a great opportunity for traditional wealth managers. Automation will commoditize previously high-value manual intensive services at a low cost and enable a wealth manager to serve more clients than before. Digitalization enables wealth managers to address customers’ specific preferences and tailor advice to their unique circumstances – ultimately delivering higher value to their customers.
The usage and assets under robo-advisory services have experienced a rapid growth. Starting practically from zero in 2012, to USD 200 billion in 2015 and according to A.T. Kearney – is estimated to grow to USD 2.2 trillion by 2020 in the U.S. alone. The total retail investable assets in the world will be around USD 80 trillion on 2020, hence the growth potential for a new way of delivering investment advisory remains huge for unforeseeable future.