Robots are taking over SA’s finance sector in a big way

 ·1 Oct 2017

Robo-advice and artificial intelligence technologies are fast-tracking new investment opportunities at a lower cost than traditional investment options.

This is according to Gavin Smith, head of Africa for independent financial advisory firm deVere Acuma, who said that robo-advisors are also able to identify options based on an investor’s risk and return expectations, rebalancing portfolios when needed to meet the investor’s specified requirements.

“These automated platforms, that use algorithms to manage investments at a lower cost than a financial advisor or active financial manager, are expected to grow significantly as an investment option,” he said.

“It is forecast that robo-advisors could manage around 10% of total global assets under management by 2020, according to a study by BI Intelligence.

“Algorithmic trading automatically, and immediately, adjusts to new developments. Theoretically, robo-advisors should be able to constantly act to perform according to an investment mandate.”

Smith states that robo-advice can also lever real-time transaction analysis for stronger portfolio management, manage risk and detect fraud by an ad-hoc analysis on large volumes of disparate types of data.

Currently, the number of investment options using robo-advice is limited, although this is likely to change as it gains acceptance, said Smith.

“There are many advantages to the introduction of robo-advisors and AI into the financial services sector.

“Lower compliance and regulatory costs help to bring down fees, speed up administration and save time.”

However Smith believes they still lack the ability to liaise with clients and understand the nuances of their requirements and changing circumstances.

This means that while they may be better at providing innovative investment options, they lack newness when it comes to the big picture, that which financial advisors have, he said.

“When it comes to understanding your goals, specific circumstances, and blending these with your retirement, tax and estate planning, robo-advisors are nowhere near to replacing good financial advice,” said Smith.

Read: Top banking brand for business in South Africa

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