There is also demand to reduce costs, mainly through the use of technology, so both established players and newcomers are under pressure to provide low-cost solutions to an otherwise costly activity.

Furthermore, with the rise of digital-only banks and other disruptive financial technologies, there is demand from the public to make advice more accessible and tactile, removing or reducing the need for phone conversations and face-to-face meetings.

That's not to say that customers don't want the right advice; they just want it delivered in an easier and more manageable way.


It's worth defining the term robo-adviser, as it has broader implications than it may suggest.

Robo-advisers will not replace human beings; let's just put that out there straight away.

Robo-advisers - like Betterment and Wealthfront in the US, Nutmeg in the UK and emerging players such as Swanest in Europe - use technology to help manage investments in exchange traded funds (ETFs).

By using algorithms that predict performance and react to certain circumstances, they provide an interactive platform for users to build portfolios with adjustable levels of risk and little or no need for human interaction.

The bonus of these platforms is that you can invest much lower amounts than in traditional wealth management spaces, so they bring accessibility to a broader audience in a way that is engaging and easy to understand.  You can assess, reassess and then update your risk appetite, portfolio mix and moral investing preferences - all at the touch of a few buttons, 24 hours a day.

It's understandable, therefore, that wealth managers feel some parts of their job are under threat.

Threatening the experts

The main perceived threat to the wealth management sector is that the digital approach to investment advice is capable of taking over long-term, stable employment opportunities.

Advise services have traditionally been reserved for the wealthy, as the costs have been pretty prohibitive for the average Joe.  The modern-day theme of financial inclusion means the market is trying to cater to those who have previously been excluded, targeting a new demographic who will find this kind of tool of great value.

Not everyone will have complex portfolios and therefore the advice they need will be relatively straightforward.  For these people, the level of advice that a robo-adviser can provide will be more than enough. As their investment requirements grow, the robo-adviser has the opportunity to refer them to a real person who can provide more complex advice.

Bridging gaps

So in the eyes of many, robo-advisers are simply providing a way to include those who may otherwise be left out of the investing game. By using the benefits of digital technology, wealth management firms can offer low-cost solutions to their clients - the cost of providing these options is less than that of attracting customers to more expensive advice from an actual person.

As such, there is little need for panic from the wealth management industry at this stage.

For fledgling investors with small, straightforward portfolios, these platforms are an opportunity to wet their feet and get engaged with the action of investing.

As these investors develop and grow, the need for more complex advice grows too - if experienced wealth managers can offer a cradle-to-grave service to their clients, brand loyalty and continuity of service should leave their jobs well intact.

The only real threat is complacency in the part of wealth managers themselves - those who don't adapt their business models to this two-tiered advice approach may indeed find that they get left behind, as loyalty to other brands overcomes the value of their years of experience.



mark-kershaw2Mark Kershaw is a business development manager at Taylor James.