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The Invasion of The Robo-Advisers

A quiet revolution is happening in the financial world and it’s starting to get a lot of buzz. The role of the investment adviser may be in danger of being taken over as young investors turn their money-management over to robo-advisers.

Robo-advisers present prospective clients with a series of online questions to determine risk tolerance. Then, based on the answers, they select investments that are supposed to meet a individual clients’ specific temperaments and goals.  The question is, are robo-advisers going to be able to generate the stable wealth for clients that can see them through the unpredictable ups and downs of life events and prepare them for retirement?

According to the Wall Street Journal, just in the past six years alone more than 200 companies have made it clear that they believe robo-advisers are the future, at least for some investors. These companies have taken the dive into the business of helping investors plan their portfolios online and include venture-capital-backed startups as well as the likes of two fund giants, Fidelity Investments and Vanguard Group as well as brokerage firms such as Charles Schwab.

With most robo firms there is typically no human interaction. With some firms there may be a brief first interaction, however clients are generally kept at arm’s length. The investor opens and funds the account online and the firm takes over and manages the money automatically from that point. The new robo-adviser requires very low and in some cases even no fees. This single fact is one that has higher-priced brokers and registered advisers worried, not only about their profit margins but their careers. Only those clients with complicated investment needs will require the expertise of a human financial adviser.

Wealth-management is currently handling assets upwards of $18 trillion.  Robo-advisers represent a small yet rapidly growing segment of this market. Currently, according to a Boston research firm, the Aite Group, digital wealth-management assets, including those managed by robo-advisers are projected to reach $55 to $60 billion this year, an increase from $16 billion at the end of 2014.


Jaime Westenbarger


Forest Hills Financial Inc.



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Guest Saturday, 20 April 2019