My first exposure to “robo-advisors” was via US keynote speaker Michael Falk at the PSG Konsult conference earlier this year. Falk took an upbeat view, arguing that automation of some aspects of the advisory tasks were actually a good thing for the 700 financial advisors in the audience: “It gives you the chance to really get to know your client. That will grow your business.”
I wasn’t so sure then that it would be a good development for all IFAs, and am even less so now. Consulting firm AT Kearney estimates that in the US, robo-advisors will be managing $2.2 trillion worth of assets by 2020 – growth of 68% a year compound. Half of that, Bloomberg reported, will be assets currently managed by humans. What happens in the US tends to be repeated in Sunny South Africa.
Financial advisors are a mixture of modern day heroes and quite a few villains. The good ones allow clients to garner the credit when advice was good; but take the blame should it go the other way. They work hard at understanding their clients’ affairs and seek to provide advice unfettered by commission or other incentives. Bad financial advisors are the kind who spend their days selling first and thinking about their clients’ last. Not hard to see which kind is threatened with extinction by the rise of robo advisors.