Robo-Advisory: The New Paradigm in Asset Management or a Millennial Fad?

Abstract

The extent to which technology has penetrated every aspect of our lives cannot be overemphasized. Finance and technology are inching closer to convergence by the day; while older investors may be reluctant to have robots doing their investing for them, many millennials are jumping unto the new asset management bandwagon. Thus, allowing algorithms to predict and recommend investment plans and automatically balance portfolios for them based on information such as age, risk tolerance level, investment goals, etc. Robo-advisory software programs periodically buy and sell securities to keep the mix matched to investors’ risk tolerance. This study shows that the emerging issues around fintech only serve to signal that the asset management industry is set for a massive overhaul as more investors seek to substitute the human asset manager for robots and algorithms. Personal finance management especially for low net worth individuals is in a nascent stage of undergoing a complete revolution as these technologies continue to develop. Adventurous investors are encouraged to try robo-advisory services. Although robo-advisory is still at a very rudimentary level especially in developing countries, asset management companies need to recognize the impending disruption and use it to their advantage or risk being smothered by the technology.