Investment pros wary of robo-advisor threat

Investment pros wary of robo-advisor threat

Investment professionals around the world expect robo-advisors to start replacing humans in the mass affluent market, but are far less concerned that computers will oust them from their work with higher net worth clients.

Of 775 investment pros surveyed by global association the CFA Institute, nearly two thirds are familiar with automated financial advice tools, with 16% not familiar at all. Awareness is highest in the Americas, with CFA members in Emea and Apac showing similar levels of familiarity.

Unsurprisingly, 54% of respondents think that asset management is the sector likely to be most affected by robo-advisors, compared to 16% who think it will be banking, 12% securities, and eight per cent insurance.

With most online tools still offering relatively unsophisticated advice based typically on providing a diversified portfolio, the vast majority of those quizzed think that the new technology will have no effect on institutional investors and ultra-high earners. However, 70% think that the tools will have a positive effect on mass affluent investors and 41% think it could even benefit high net worth people.

With this in mind, respondents think the mass affluent are most likely to experience automated tools replacing engagement with humans. Institutional investors and ultra-high net worth investors are not expected to see the same trend because they require complex, tailored advice.

The rise of automated financial advice tools is likely to have a positive cost, access and choice effect for consumers, although respondents are more divided on how quality of service will be impacted.

Nearly half of those quizzed think that the biggest risk associated with robo-advice is that there could be flaws in the algorithms used by providers, while 30% worry about mis-selling and 12% are concerned about privacy and data protection.

Overall, respondents think that robo-advisors will be the technology to have the greatest impact on financial services over the next one and five years, ahead of blockchain tech, crowdfunding and P2P lending.

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