An important advantage of robo-advisors
Robo advisors
Posted by MoneyController on 20.05.2022
- 637
- 0 Follow me
Research conducted by 'finews.com' magazine shows that the demand for automated advice, the so-called 'robo-advisors', has increased since the market crisis that began with the outbreak of the pandemic. Robo-advisors, after all, have an advantage over what a DIY investor/saver could do independently. Let us see what advantage this is.
The advantage of robo-advisors (but also of professional advice)
Explaining the advantage of robo-advisors is the head of the Swiss digital asset manager Descartes Finance, Adriano Lucatelli: the absence of emotions and the precise investment rules that characterise robo-advisors protect investors from rash and irrational choices.
Even in the case of a management mandate, of course, financial professionals - bank advisors or independent consultants, it matters little - offer the same advantage. The problem, as Lucatelli points out, is that while many savers are aware of the guarantees offered by financial professionals, trust in robo-advisors has only started to grow again fairly recently.
Fluctuating markets, costs and digitalisation foster demand for robo-advisors
Since the outbreak of the pandemic, the increase in market fluctuations has increased the demand for these automated forms of investment, which are immune to the panic generated by market crashes. Explaining this to 'finews.com' is Christian Mathis, CEO of Swiss investment specialist Viac. Mathis also points out how important it is for service providers to emphasise the savings that these automated advice and investment formulas bring. As he explains, in the long run, a difference in return between a quarter and half a percentage point can translate into thousands of dollars.
The increasing digitalisation of society also plays in favour of robo-advisors. Many investors/savers, especially younger ones, now find it almost unthinkable to have to physically go to a bank to carry out any transaction. Investments, in this sense, are no exception. Lucatelli predicts that the digitisation of financial institutions, including banks of course, will proceed especially in the area of products that are easier to digitise: "voluntary pension plans, simple progressive share purchase accounts and fractional trading models".
Banks and the hybrid approach
As stated in the article, from the point of view of automation, it is the hybrid approach that will become increasingly popular among banks. While certainly giving the guarantee of personal advice, however, the hybrid approach, for Mathis, will not be a source of real cost savings.