Learning to love the robo-investor and robo-adviser

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Automation is driving progress in advice

In short, big changes are required to help ordinary people grow their money and shore up their financial future. And with a quarter of Britons having less than £3,000 saved (according to data from Wealthify) the solution must also be low-cost and affordable for the mass market, which is not willing to pay £150 per hour for financial advice. Robo-investing, with its far cheaper operating models, holds great promise as a way to achieve this overdue democratisation of saving and investment. 

It also changes how people access investment services. Anyone, anywhere (with an internet connection) can take advantage – not just those who have the time or inclination to find and visit a good financial advisor or investment manager. It is instant and agile services like this that appeal most to the younger generation and leave banks and traditional providers scratching their heads as they try to work out how to compete.

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Robo works for those accustomed to polished online services, especially those who are not particularly loyal to the big, and in some cases damaged, financial brands.

So robo also ticks the accessibility box, but when it comes to managing investments, modern machines are in many respects a lot better than humans.

Being successful in today’s complex financial markets is a matter of processing and analysing tremendous amounts of data as quickly as possible – a task for which computers will always have the upper hand as their precision and computational power far exceeds that of any human.

Successful investing also requires discipline and consistency; humans are prone to bias, panic and emotional decision-making, all of which can spell disaster for an investment portfolio. It is precisely why many of today’s top institutional investors are becoming increasingly reliant on algorithms and automation, and across financial services Fintech is driving huge improvements in customer experience, security, risk management and operational efficiency. Today it is power to the programmer, technology is centre stage.  

But in the complex world of financial services, while technology often has a starring role, achieving the right balance of human and machine is crucial. Humans still have an important part to play – it will just be different to that of the traditional investment manager.

Robots are great at the ‘heavy lifting’, but we will always need investing professionals to design, build, and tweak the algorithms, and ultimately to keep a watchful, reassuringly human eye on the money. And, crucially, these investment professionals should be expert in selecting and managing an investment portfolio suitable for the mass market.