The rise of the robo advisor sounds rather like the next instalment of the Arnold Schwarzenegger Terminator series. However, the truth of the matter is that it’s a “new” trend that has materialised over the past 6 years, and it refers to investing money. It’s the trend of “robo investment,” which is the name given to a service provided by robo advisors, whose expressed aim is making investing an easier thing to do for wannabe investors.
What is a robo advisor?
The main attraction behind the concept of robo investment is to make it cheaper and easier for people to invest their money in some sort of saving plan. It’s easier because, in its purest form, a robo advisor is exactly what it says on the tin – a robot that advises you how to invest, and in what.
Of course it’s not really a robot. It’s a set of algorithms that have been created by financial experts, with a view to formulating customised portfolios dependent on the investors’ preferences. It’s cheaper because, instead of having a team of human experts analyzing and managing your fund, it’s done instead, using algorithms.
The inexorable rise of the robo-advice
The rise of the robo advisor has been steadily growing. In the early part of 2016, the newest “fad” in the Fintech industry was”peer to peer” lending. In the latter part of the year it was “Blockchain.” But with more and more people showing interest in robo investing, and the take-up by High Street banks like Barclays and HSBC, the rise of the robo advisor is the biggest new Fintech trend this year.
Why robo investment is so popular
The reasons that the robo advisor is becoming such a popular concept are twofold. The first is its simplicity. If you know little or nothing about investing, and you don’t really want to know more, robo investing is the perfect platform. It is essentially as easy as filling in an online application form through your chosen robo advisor, and your saving portfolio will be automatically created. There is no in-depth discussion needed with a financial advisor, and once created, your portfolio will be robo managed.
The second reason for the growing popularity of the robo advisor is its affordability. There is in effect no, or very little, in the way of a management fee. So, not only is the cost of a robo advisor a fraction of the cost of a fully fledged IFA, but you can begin with a smaller size of investment too.
The top 7 robo advisors in the UK in 2017
According to the Advisory HQ website , the top 7 robo advisors here in the UK this year are:
The above list is shown in alphabetical order, not necessarily by popularity.
The fear that holds many back from robo investing
There is however one major concern that is holding many people back from jumping on the robo advisor band-wagon, and that is one of trust. A lot of people have an in-built adversity when it comes down to giving a machine, total responsibility and say over their savings or investments. By way of indication, a recent survey carried out by ING in 15 European countries (including the UK), found that only around 3% of people would give a robo advisor their complete trust.
The human touch that could dispel the fear
We here in the UK often take our lead in trends from the US, and according to CNBC, more robo advisors are adding a human touch to their operations. The FT reported earlier this year that a pioneer of the robo advice industry, Betterment, has taken the lead with this new variant in the US. If the normal USA/UK follow-on is anything to go by It means that more IFAs here in the UK could also be following suit.
Founder Dinis Guarda
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