The Algorithm Who Advised me
Rhea Wessel · CFA Magazine · 2015
The range of services differs from company to company, but generally, web-based robo-advisers automate elements of investment advising, such as basic advice, account aggregation, risk assessment, financial planning, rebalancing, tax optimization, and reporting.Once a user has everything set up with an automated provider, the investor has (at least in theory) access to high-quality investment advice that may not be personal but is personalized algorithmically.Often, the investment vehicle provided along with the advice is a passive investment, such as an ETF."Robo-advice is a wake-up call for the investment management industry-in terms of pricing, creating a great customer experience, and being fair to the end customer," says Srini Venkateswaran, a partner at strategy and general management consultant Marakon in New York who advises investment management firms on how to run their businesses.Essentially, robo-advisers mean the empowerment of the investor, according to a report by MyPrivateBanking GmbH titled "Robo-Advisors: Threats and Opportunities for the Global Wealth Management Industry."Previously, investment managers had all the expert knowledge, and people went to their wealth advisers for help.Now, the clients are getting their hands on the expertise."All the professional knowledge is getting put into software," says Steffen Binder, research director at MyPrivateBanking.