Is Robo-Advice more C-3PO or The Terminator?

Robo-advice done well is a welcome and much needed addition to the personal investment space

In fact it’s not like either. But if robo-advice had to come from a movie robot then my vote is from Darryl Hannah in Blade Runner please.

A very warm welcome to the first roboadviceblog post which will be exploring all things Robo-advice form the perspective of both investors and IFAs. This first post acts as a high-level context setter for the blogging to follow.

What is Robo-advice?

‘Robo advice’ was virtually unknown in the UK and Europe only a couple of years ago but fast forward to the here and now and this space is fast becoming a very hot topic.

In reality Robo-advice is actually not that robotic at all. When executed well, Robo-advice simply leverages smart and intuitive technology to allow investors to access the investment expertise of real flesh and blood money managers who can provide highly diversified investment portfolios built to protect and grow investors nest eggs at a cost accessible to all. So robo-advice is actually more like Ironman – the best parts of man and machine blended together.

An investor typically answers a series of intuitively phrased online questions to assess their needs and risk appetite which is then used to build a highly diversified investment portfolio proposal that the investor can choose to accept. A low cost high quality portfolio with a top quality asset manager can literally be done and dusted in 15 minutes.

What need does Robo-advice meet?

Of the 14 million or so UK investors, over 85% self-manage some or all of their investment portfolio. This DIY approach can be very time intensive and is fraught with pitfalls for even the financially savvy. Additionally there are millions of people who have the need for an investment portfolio but for whom traditional advice is not accessible as the costs do not stack up for the adviser or the investor. These folk often end up simply keeping their money in savings account which, given current interest and inflation rates, can erode the value of their capital over time.

Robo-advice therefore provides an opportunity for a huge number of people historically not able to access the expertise required to construct a fit-for-purpose investment portfolio to do so. This approach can also be blended with ‘in person’ advice on issues such as tax.

It’s worth noting that financial regulators are strong backers of the Robo-advice model to ensure everyone has a chance to access expertly built investment portfolios.

What will future roboadviceblog posts cover?

Future blogs will look at such things as how the Robo-advice space has developed, Fintech overall, selection of a Robo-advice provider plus more opinion and analysis on how Robo-advice has the potential to transform for the better the choice and outcomes for scores of retail investors whilst also providing IFAs with another revenue generating string to their bow.

Author: Simon Bottle

Simon Bottle consults on Marketing, Product Development, Sales, Client Services and Efficiency Re-engineering projects.

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