Robo Advisors vs. Human Financial Advisors: Why Not Both?


Hybrid Robo Advisors

After the strong growth of the robo advisory approach in recent years, promoted by numerous start-ups worldwide as well as sizeable number of early adopting wealth managers, a new ‘sub-species’ has emerged: the hybrid robo/personal contact service, which adds a substantial software component to human interaction in the client advisory process.

This is a key finding of MyPrivateBanking’s latest report “Hybrid Robos: how combining human and automated wealth advice delivers superior results and gains market share”.

Robo Advisors vs. Human Financial Advisors

Robo-advisors have begun to distinguish themselves into three models, but they each have the same goal. Standalone companies such as Betterment (the most popular U.S. robo-advisor) use algorithms to recommend stocks and manage portfolios. Hybrid robo-advisors combine computerized recommendations with on-demand advice from a human being. And advanced standalone companies leverage more complex algorithms to create and actively manage portfolios.

Robo Advisors for Advisors

In MyPrivateBanking’s view, hybrid robo advisory strategies represent a paradigm shift in the pace and path of change in the wealth management industry. MyPrivateBanking estimates that hybrid robo services will by 2020 grow to a size of USD 3,700 billion assets worldwide; by 2025 the total market size will further increase to USD 16,300 billion. This number constitutes just over 10% of the total investable wealth in 2025.

By comparison,“pure” robo advisors (completely automated without personal service added on) will have a market share of 1.6% of the total global wealth at that stage. The report includes a projection for the market size and growth globally of Hybrid Robo Advisor and pure play robo advisor, including a breakdown between North America and the rest of the world, and a split by the retail and affluent wealth and the HNWI/UHNWI segments.

Hybrid robo solutions are a dynamic and also unstable new phase in the wealth management industry’s transformation. MyPrivateBanking expects 2016 to be a year of significant developments – several major players have announced that they will reveal their hybrid offerings in the course of the year and many more wealth managers are currently working through the issues of hybrid robo adoption. The institutional players entering the robo advisors markets and their offerings are analyzed in detail in the report.

Hybrid Solutions will impact many financial services sectors

The drivers for hybrid robo innovation will come from several different sources within the global financial industry. For a start there is is the inspiration derived from the original robo advisor services. To this must be added the new opportunities that have arisen following the launch of a substantial range of new B2B technology providers, some focused only on the banking and wealth management industries and others with a broader scope.

The next 12 to 18 months will provide numerous demonstrations of the impact of the new (white label) technology providers and robo/conventional partnering on wealth management. In particular, as this report’s case studies show, the resulting hybrid wealth management solutions will spring up in a number of different parts of the global finance industry. Furthermore, with the help of robo technology, MyPrivateBanking expects to …read more

Source:: Business Insider


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