A robo-advisor is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use human financial planners.
See what the P4Capital Team have to say on the subject
Robo advisors are actually are really simple idea. Perhaps therein lies their brilliance.
The algorithms don’t need to be complicated. A balanced approach to investing + long term investing horizon is likely what most users will select. They aren’t reinventing the wheel, just breaking down the barriers to entry for the novice investor who doesn’t want to go into a branch and sign a mountain of daunting paperwork
Wealth Simple which was mentioned by both my colleagues has only $400 Million in assets under management at the moment, which in the context of wealth management, is an extremely small amount. It won’t be too long before we see a $400 Million dollar Major league baseball contract… Brian Harper? or Mike Trout?
But that doesn’t mean the big banks aren’t taking their threat seriously. It’s not about assets under management right now- that’s not the right metric to focus on. Robo advisories are in the client accumulation game. Millennials may not have large cash surpluses now, but they will as they get older and into their prime earning years… banks are well aware of this.
I predict we see an influx of many new Roboadvisors, some will fail, some will succeed, and others will be bought out by major banks and incorporated into their business, not dissimilar to Scotiabank purchasing ING Direct Canada and operating it under the Tangerine bank. Ironically, the best way for people to make money from a roboadvisor is going to be to own shares of the companies themselves, rather than buying their products.
What might have been a scene lifted from a sci-fi flick, seems all too real today. Machines are invading into each and every aspect of our daily lives.
Algorithms, a by-product of these super machines, seem to be the Holy Grail in today’s mechanized world! Right from online retail purchases to typing a search string to look for online suggestions, to even catching up on the latest movie! Another area that I see algorithms making a giant leap is in the area of finance and wealth management.
Robo-advisors promise managing your investments through unique algorithms. Targeting the millennials, robo-advisors definitely offer some distinct advantages. Price, convenience, seamless integration across different devices. Looking at the number of players jumping into the fray including the popular ones like WealthSimple, WealthBar, NestWealth this market is definitely growing. BMO has also recently launched its own solution, making it the first Canadian bank of the top 5. An established brand name and many years of managing funds might give BMO the edge. There are some upfront advantages that robo-advisors bring to the table, but in the long run what really matters, is if it truly makes you a smart investor. I am curious to see how this all plays out, would this be another technology disruption or is it here to stay!
SmartFolio, online portfolio manager, was recently launched by BMO to target investors, specifically millennial who usually do their banking on their mobile devices online and may have limited investment knowledge- those who are nto ready for DIY investing but also don't want to pay big fees to an investment advisor. As a millennial myself, I can speak to this. I have a TFSA with BMO and recently opened up an account with WealthSimple as well so that I can compare the two. While transferring money online is convenient, I actually prefer the face-to-face interaction that you get at most banks when it comes to asking questions about my investments and seeking advice. Though the term robo advisor may be a bit mis-leading, as there human advisors behind it managing all the funds. It will all come down to not just a battle of who can offer the lowest fees, but also who can offer you the best performance, convenience and transparency.
And not just with robo advisors, things are moving with block-chain technology as well. 40 global banks just did their testing and proof of concept experiment of blockchain technology from five different blockchain providers: Chain, Ethereum, Eris Industries, IBM and Intel. The tests are expected to continue with government regulators as well.
Based in Toronto, PLANET4iT is a Canadian-owned and operated recruitment and placement agency that helps companies and employment seekers survive the Digital Revolution