Last modified on August 16th, 2016 at 6:02 pm

in ,

How Robo-Advisors & Fintech Will Revolutionize Asset and Wealth Management Industry

Machine learning is the next big thing.

fintech_robo_advisors_timelybuzz

Last updated on August 16th, 2016 at 06:02 pm

In the movie The Terminator, there is a foreboding scenario that in the not too distant future machines will take over our lives and wreak havoc and destruction on the planet and the survival of the human race will depend on how man battles his own creation, super advanced computers controlling war machines to destroy humanity.

Digital Technology has advanced to such a level in the developed countries of the world that it is simply mind boggling. Communication has become so easy and information so accessible that it is possible to glean any information at the click of a key. From ordering a Pizza to planning a vacation with ticket bookings , hotel bookings, visa information , currency requirements or any other miscellaneous information .

People are traveling on autopilot cars powered by electric, trains, planes are being run on auto mode, space travel is becoming very popular and colonizing Mars is not only being contemplated but actually on the anvil.

Japan is already into a very highly advanced stage of Robot technology with Robots replacing humans at the restaurant, supermarkets, and shops.

Robots will very soon be used as domestic help and undertake all domestic chores from serving bed tea to cleaning the house and possible even tucking in the toddler. Robots are also used in hazardous scientific experiments or moving nuclear material or even deep sea exploration . The possibilities are endless. Miniature robot technology is being used by bomb disposable squads and police are using technology to detect hidden weapons etc.

China is fast becoming the industrial and economic powerhouse of the world and with it is launching an audacious drive to fill its factories with advanced manufacturing robots.

To retain its vast manufacturing base the Chinese government hopes to generate more productivity from robot controlled factories.

The country has already made huge investments in robot technology and the province of Guandong known as the heartland of Chinese manufacturing is investing a staggering and voluminous amount of 154 billion dollars.

The  founder of Foxconn, a company that employs vast armies of workers who make devices such as Apple’s iPhone has said that his company will install more than a million robots in the next few years which will replace human workers to a great extent making it cost effective and more productive.

Robots are designed what they are programmed to do and nothing less and in most cases. Their work is repetitive , precise  but they do not exhibit any intelligence. However, things are changing at a rapid pace and robots are now being endowed with artificial intelligence thanks to new techniques and algorithms enabling them to learn more quickly and effectively .

There are various methods for enabling robot learning, and some are already producing very promising results in research labs around the world. Using large simulated neural networks which has proved indispensable in teaching robots to understand the contents of images, video, and audio. Some companies now aim to use the approach to training robots how to see, grasp, and reason.

Research and development in robotics are expanding at a rapid pace and now robots are teaching other robots accelerating the learning process. The Internet is being used to teach robots which can easily be applied to industrial settings,

The question arises that will robots be confined to factories or homes for menial work or will be upgraded for greater use in offices particularly in the business world. Perhaps Fintech has the answer

Fintech or financial technology is an economic industry composed of companies that use technology to make financial services more efficient . Fintech refers to new applications, processes, products or business models in the financial services industry. These solutions can be differentiated in at least five areas.

  • First, the banking or insurance sector are distinguished as potential business sectors. Solutions for the insurance industry are often more specifically named “InsurTech”.
  • Second, the solution with regards to their supported business processes such as financial information, payments, investments, financing, advisory and cross-process support. An example is mobile payment solutions.
  • Third, the targeted customer segment distinguishes between retail, private and corporate banking as well as life and non-life insurance. An example is a telematics-based insurance that calculates the fees based on customer behavior in the area of non-life insurance.
  • Fourth, the interaction form can either be business-to-business (B2B), business-to-consumer (B2C) or consumer-to-consumer (C2C). An example is a social trading solution for C2C.
  • Fifth, the solutions vary with regard to their market position. Some, for example, provide complementary services such as personal finance management systems, others focus on competitive solutions such as e.g. peer-to-peer lending.

While they are not using Robots completely the technology being used is termed as Robo-advisors. The International financial market such as corporate banking, private banking and asset and wealth management is ready to be inundated and disrupted by Fintech and blockchain related technologies.

Robo-advisors will be taking over. But what exactly is a Robo-advisor?
A Robo-advisor is a service that uses highly specialized software to do the job of wealth managers or investment advisors – people who decide what type of investments you should be making and then tinker with those investments over time. Robo-advisors typically ask their client, the investor, a few questions to determine and assess risk factor.

Through the use of  proprietary algorithms, they spread your money in sound  investments, making adjustments as your situation and the market change. They typically collect around 1% less in fees than a professional investment advisor.

Robo-advisors charge lower fees Let’s say you’ve got a nice nest egg of $50,000. A professional investment advisor who charges a 1% fee for recommending a portfolio will charge you $500 every year, whether your portfolio goes up or down. Plus, his portfolio recommendations might include pricey mutual funds (another 2% gone!) and lots of stock trading, both of which can eat into returns.

Robo-advisors invest primarily in inexpensive Exchange Traded Fund ETFs and only charge 0.50%, cutting that $500 yearly fee in half. And if you invest larger amounts of money? That 0.50% advisor fee shrinks even more with robot-advisors.

Robo-advisors also often negotiate lower yearly management fees for ETFs and offer investors free trading; those savings alone can be enough to counteract the small management fees they charge. Plus, Robo-advisors rarely demand a minimum balance, which means just about anyone over 18 can invest.

Another advantage is the 24/7 accessibility and automation of Robo-advisors. Since the companies operate entirely online, you can sign up, deposit money, check your balance, withdraw money, etc., all without getting out of your pajamas.

Some Robo-advisors also perform automatic portfolio rebalances and tax-loss harvesting for free—both of which can be tedious and pricey with professional investment advisors.

It all depends on the Robo-advisor one uses . At Wealthsimple, e the following asset classes in our portfolios- stocks (Canadian, USA, Europe, and emerging markets), fixed income and real estate. It is believed  they represent the best long-term sources of growth, income, and stability for investors.

Despite the name, not all Robo-advisors offer real advice. And you won’t get any free pens or lollipops when you visit the office. Because there is no office. Or lollipops. At Wealthsimple, we believe that personal financial questions deserve professional personal answers. That’s why every client has access to a professional Portfolio Manager who can answer questions about your investments, your personal finance goals, or any other financial matter you’d like to discuss. We call this our Wealth Concierge, and if you invest larger amounts of money? That 0.50% advisor fee shrinks even more with Robo-advisors.

Robo-advisors also often negotiate lower yearly management fees for ETFs and offer investors free trading; those savings alone can be enough to counteract the small management fees they charge. Plus, Robo-advisors rarely demand a minimum balance, which means just about anyone over 18 can invest.

Another advantage is the 24/7 accessibility and automation of Robo-advisors. Since the companies operate entirely online, you can sign up, deposit money, check your balance, withdraw money, etc., all without getting out of your pajamas.

Some Robo-advisors also perform automatic portfolio rebalances and tax-loss harvesting for free—both of which can be tedious and pricey with professional investment advisors. Some companies are using cyborgs, half human and half  machine as Robo-advisor which sounds scary.

Although in the underdeveloped countries of the world it will take a lot of time to introduce such technology  the developed countries are already using such innovative technology which is transforming the very face of asset and wealth management. Robo-advisor is the In thing in the business and finance world.

As stated earlier the pace at which technology is advancing is mind boggling and soon machines will not serve us only tea in the morning but run all our personal affairs too.

It will be difficult for many to adapt to the newer technology but it is now a part and parcel of lives. Let us try to make the most of it.

Leave your vote

0 points
Upvote Downvote

Total votes: 0

Upvotes: 0

Upvotes percentage: 0.000000%

Downvotes: 0

Downvotes percentage: 0.000000%

Written by Syed Anwer Ali

Ali Anwer is a veteran journalist having worked in Asia’s leading English daily newspaper for almost a decade. A prolific writer, he has contributed articles to different newspapers and established websites. He has also engaged in sports reporting for a brief period.

Having traveled the world extensively, he is a repository of information on world history, current affairs, political events and the entertainment industry. Being a movie buff he is an encyclopedia on Hollywood movies and actors.

Leave a Reply

Your email address will not be published. Required fields are marked *