Research from Corporate Insight found that eleven of the leading online automated financial management plaforms - so-called "robo advisors" - now manage a total of $19 billion in assets. That’s still a relatively small slice of the entire wealth management industry, but it represents a 65 percent growth for robo-advisors in just the past eight months.
Corporate Insight said this rapid growth reveals immense potential for these platforms and creates benefits for both advisors and retail investors.
“New online advice solutions help drive costs lower, create greater transparency on pricing and performance and improve website and mobile platform capabilities,” Corporate Insight said in a statement.
For example, Charles Schwab and TradeKing announced new online account services for retail investors. After it rolls out, Schwab plans to bring a version of its Intelligent Portfolios service to human advisors. Vanguard and Merrill Edge announced plans to expand services for less affluent clients to compete with the cheaper robo-advisors, and Fidelity and TD Ameritrade plan to use technology from online services to help their human advisors.
It’s now impossible to dismiss the impact that robo-advisors have had on the industry, but Corporate Insight analyst Grant Easterbrook says they aren’t ready to replace humans any time soon.
“For financial planners, it’s important to keep in mind that the vast majority of the new online advisors that don’t use any human touch don’t offer holistic financial planning,” said Grant Easterbrook, an analyst for Corporate Insight. “There are many reasons why financial planning may prove harder to automate, but a crop of innovative new firms like iQuantifi, Planwise, Plumvo and others will test the viability of online financial planning.”
