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Should you ditch your financial advisor and hire a robot?

Los Angeles Times

If you've ever wished for a robot to clean your house or walk your dog, you'll likely understand the appeal of a robo-advisor. These services offer a relatively hands-off way to manage your investments. Also known as automated investing or online advisors, robo-advisors use computer algorithms and advanced software to build and manage a client's investment portfolios, offering such features as automatic rebalancing and tax optimization. They require -- and often offer -- little to no human interaction. But robo-advisors are cheaper than what you'd pay a human financial advisor, often by a long shot.

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Automation has infiltrated nearly every facet of our lives -- but in the realm of managing money, the robot invasion is a welcome technological development. These automated investment services are built with the kind of technology that would make the geekiest mathlete salivate. But it's the seamless, easy-to-use interface that makes robo-investing an appealing option for investors looking for low-cost, easy ways to invest. In five years, assets under management by robo-advisors will increase 68 percent annually to about 2.2 trillion, according to consulting firm A.T. Kearney. Put another way, it's predicted that by 2020 robo-advisors will control 5.6 percent of Americans' investment assets, up from 0.5 percent today.

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Evolving consumer expectations, the rapid adoption of technology and new competitors entering the markets are placing new demands on today's wealth management firms. These trends are re-shaping the look and feel of the industry, and the change is happening across all aspects of the value chain, from client acquisition to advice to ongoing portfolio monitoring and decision-making.

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"Customer experience is chief among the areas where traditional financial institutions have fallen short. Not long ago, wealth management was considered a service almost exclusively confined to the affluent. With their millions at the ready, wealthy investors could use wealth managers to provide a range of tailored investment-related services, and those services would normally come at a high price. But these days, such a perception of wealth management is becoming old, or simply not accurate. Innovation broke down those barriers of exclusivity, enabling services that were previously only accessible to the privileged few to be in the hands of the masses of ordinary investors. Wealthtech falls under fintech as a segment which specifically focuses on technology that aims to transform wealth management and retail investment. It involves the application of digital solutions to wealth management, ultimately providing new channels to deliver more efficient, cost-effective and efficient ...

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Does a robot manage your money? For many of us, the answer is yes. Online and algorithmic investment and financial advice is easy to come by these days, usually under the moniker of "robo-advisor." Startups such as Wealthfront, Personal Capital, and Betterment launched robo-advisors as industry disruptors, and incumbents, such as Schwab's (Intelligent Advisor), Vanguard (Personal Advisor Services), Morgan Stanley and BlackRock have joined the fray with their own hybrid machine/advisor solutions. It's clear that robo-advisors and AI play an important and growing role in the financial services industry, but a question remains. Will robo-advisors disrupt corporate capital allocation the same way they have personal capital allocation? And, will they shake up the trillion-dollar corporate consulting and advisory industry?