Technology is redefining the relationship individuals have with money. As automation permeates into all industrial sectors, the emergence of digitisation in the financial world has exuded the potential to transform and empower all layers of society.
With the rise of robo advisers, banks and brokerages are scrambling to compete with the new vanguard of investment platforms. Consisting of an innovative wave of financial players influencing disruption of wealth management models, robo advisers appeal to individual investors looking to take charge of their financial futures and intuitional investors looking to digitise and diversify their investment service offerings.
These disruptive models have the attention of a younger, more diverse audience. This comes down to the fact robo advisory services are democratising all facets of investing and making it more accessible to the common investor. By removing intermediaries and significantly reducing costs, the investor appeal is even greater.
According to AT Kearney, the forecast for assets under management by robo advisers in the US is set to grow by almost 70 per cent annually to $2.2 trillion (Dh8 trillion) by 2020. Moreover, market analysis suggests the global robo advisory market is expected to grow at an overall annual compound growth rate of 53.54 per cent until 2023, amounting to a global revenue spike of $73.7 billion.
A reset of user experiences
Traditionally, customer touchpoints of financial advisories have been limited in interactivity, time and attention given to clients. However, consumer bases are adopting technology with fervour, with smartphone penetration rates forecast to reach close to 90 per cent by 2024, according to Ericsson. The digital characteristics of robo advisers mean that they are more accessible and readily available through online and mobile channels.
By operating in the digital spaces where consumers are engaging, robo advisers are able to attract semi self-directed investors opting to have financial acumen at their fingertips. With most robo adviser models, the level of automation correlates to the net worth of the individuals investing.
Because they are fundamentally more accessible than traditional advisories across all wealth brackets, and smaller sums of investment are needed to get started, the surge in investors using digital wealth management platforms can be put down to the revised model for customer interaction.
Offering seamless and intuitive digital touchpoints, this enhances the investing experience by reducing the “pain points” commonly found with human brokers, such as exclusivity of market knowledge, lack of communication, poor information and less transparency. With robo advisers, advanced algorithms and technology interfaces previously only available to institutional investors is now reaching individual investors.
Everything form risk appetite assessments, financial strategy breakdowns and fund performance indications can be enjoyed by users through easy to use, intuitive digital advisories. This simplifies and enriches the overall investing experience, while also bringing passive investment opportunities closer to a wider segment of investors.
The human quotient of traditional brokering offered exclusive insight into the inner workings of the investment sphere, but only to an elite few. With robo advisers, the degradation of boundaries limiting investors to analysis of markets and stock performance are no longer there.
The automated element of robo advisers makes investing a democratised process, empowering users with professional advice and services at their fingertips, and eradicating complicated financial jargon. Robo advisers also remove the emotion element from the investor-broker relationship, which allows for a more conducive investing situation.
Knowledge is power, and by giving individuals the ability to control their assets and understand the intricacies of the funds they are investing into, investing becomes more approachable and less intimidating for the masses.
Access to all
Investing has long been synonymous with high net worth investors. But, with the evolution of automated investment services, this has levelled the playing field. Easy to use and simple to understand, digitally-forward financial services provide inexpensive ways to diversify smaller portfolios while still delivering users professional assistance and expert financial strategy.
By making investing a more seamless, accessible, convenient and simplified experience, these services present new routes for individuals looking to accumulate wealth, especially since they had limited options to do so prior.
The wider economic impact of making financial services more accessible to the masses is a powerful motion. More participation means more equality long term.
Knowledge proliferation and ease of access to investing can lead to proliferation of wealth on a large scale. The proliferation of investor confidence is overwhelming too, especially given the prosperous impacts an empowered society, nation or world could have on overall global prosperity.
At the heart of this, robo advisers are enabling investors to have more of a say in their financial futures. In short, the financial inclusivity that robo advisers deliver is inherently good for all of society.
Rashed Al Muhtadi is Head of UAE at Wahed Invest.