Robo-advice and artificial intelligence technologies are fast-tracking new investment opportunities at a lower cost than traditional investment options.<\/p>\n
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\u2019s risk and return expectations, rebalancing portfolios when needed to meet the investor\u2019s specified requirements.<\/p>\n
“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.<\/p>\n
“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.<\/p>\n
\u201cAlgorithmic trading automatically, and immediately, adjusts to new developments. Theoretically, robo-advisors should be able to constantly act to perform according to an investment mandate.\u201d<\/p>\n
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.<\/p>\n
Currently, the number of investment options using robo-advice is limited, although this is likely to change as it gains acceptance, said Smith.<\/p>\n
\u201cThere are many advantages to the introduction of robo-advisors and AI into the financial services sector.<\/p>\n
\u201cLower compliance and regulatory costs help to bring down fees, speed up administration and save time.\u201d<\/p>\n
However Smith believes they still lack the ability to\u00a0liaise with clients and understand the nuances of their requirements and changing circumstances.<\/p>\n
This means that while they may be better at\u00a0providing innovative investment options, they lack newness when it comes to the big picture, that which financial advisors have, he said.<\/p>\n
\u201cWhen 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,\u201d said Smith.<\/p>\n