Today we are witnessing the emergence of Robo-Advisor platforms. These first generation offerings, or Version 1.0, are not appreciably different than many turn-key asset management programs or the model portfolios used by some investment advisors but may have more advanced processing capability and user-friendly interfaces than what is available from traditional providers. The major advantage of these platforms is scalability, allowing for lower fees that will appeal to price sensitive clients and be accessible to a bigger group of potential investors. However, Robo-Advisor 1.0 is just the start of the financial services revolution.
Robo-Advisor 2.0 – with the help of cognitive computing such as IBM’s Watson – will move beyond strict investment management to provide comprehensive, integrated technical solutions. Depending on client demand and the regulatory environment, this could encompass areas as far-reaching as financial planning, insurance, legal, accounting and tax, banking, and risk management services. “Technology that can design cross-disciplinary wealth management strategies tailored to a client’s real-time needs, personal considerations and preferences is an exciting new frontier for financial services,” says Hannah Shaw Grove, an independent consultant to family offices and a founder of Private Wealth magazine. “Such a deliverable could enhance the back-office systems for many advisory professionals while challenging the traditional value, process, and cost associated with a full-service financial solution.”
Robo-Advisor 2.0 capabilities will likely bring greater transparency and accountability to a field that still remains largely opaque to many clients while further reducing costs and delivery timeframes. This combination of benefits can be very appealing to consumers and will probably attract a small cohort of self-driven investors and autodidacts, but may still result in a tool that is enhances the deliverables of professionals given the complexity of the various components involved and the relationships and interdependencies between them.
The following generation, Robo-Advisor 3.0, will usher in a new era of financial services for everyone. By adding process expertise to the technical expertise of Version 2.0, the future platforms will understand personal, financial, and lifestyle concerns and respond proactively, essentially creating a personalized family office. Today, family offices are restricted to the ultra-affluent due to the high cost associated with sourcing and managing the complete range of expertise and specialty services needed to meet the desires and preferences of a significantly wealthy family. The technological advancements at the heart of Version 3.0 will enable the suite of family office deliverables to be cost-efficient for almost anyone (on a variable cost basis) and provide direct connections between the users and the vendors that provide the underlying services....MORE
Monday, November 17, 2014
Robo-advisors: A Family Office For Everyone!