Robo-advisors deliver automatic portfolio management solutions – investment targets and hazard screening, asset allocation and portfolio rebalancing – all with minimum human intervention. This same Technology has also captured more than one human financial adviser with his trousers down as investment advisory services are now considerably more transparent. Wealth Managers, for instance, continue to charge annual expenses of about 1 percent in any event, when a large part of investments are handled through index funds rather than actively.
Fooling Some of the People Some of the Time
Wealth Management Is a $5 trillion dollar business and hidden investment costs would be the shame of the investment advisory company, particularly at old school brokerage companies. Really, even passive index funds may kickback a hidden 1 percent expense to a broker. These hidden charges decrease investment yields 1% annually or even a whopping $17 billion, resulting in up to a 12% reduction in retirement income, according to a recent report on investment advice and retirement savings from the President is Council of Economic Advisers (CEA).
Wealth Management firms will need to modify relationships and trust with the investment community. People who have focused on customer relationship building alone, however, have observed their customers escape for electronic investment platforms. Our research indicates that organizations that incorporate digital tools in their business models can help strengthen these connections instead of threaten them, and actually help them draw the most profitable investors, says Owen Jelf, international managing director of Accenture’s Capital Markets practice.
Online Investment services, such as the custom robo advisors, are forcing their human counterparts to be on top of the game. At the least, they are adding comparable investment services and products, and of course there’s the pricing.
The advent Of digital wealth managers is helping individual investors in three significant ways:
Access to Professional Portfolio Services – Investors no longer need to pay high charges to acquire expert portfolio advisory services, nor do they need to compromise on quality. TradeKing – one of the cheapest of the discount brokers – now provides customized, personalized portfolios on par with a few high net worth wealth managers.
More Transparency – Investors can and ought to require complete disclosure from financial advisers now. Human advisors are feeling the squeeze to disclose as much information as robo-offerings, which can be targeting/aimed in 75 million millennials who have grown up in a more transparent digital world.