How Robo-Advisors Are Changing the Future of Investment Banking
Digitalization in the investment banking industry comes with both pros and cons. Though Robo-advisors can automize many things it will not supplement the human factors.
Imagine you are investing $100 a month. You are entering this data along with the required information through the mobile app or website. Small investors like you will receive –
- Finance advises,
- Intelligent portfolios,
- Low fee betterment,
- Tax minimization strategies,
- Created portfolios,
- And more.
The Robo-advisors – digital investment platforms facilitate you to compete with the big players in financial management.
With this, let’s delve deep into Robo-advisors.
Financial sectors are adopting Robo-advisors – the financial planning software to help investors manage portfolios and process investment data. This digital platform offers online, customized investment advice and portfolio constitution through Exchange Traded Fund (ETF) or mutual funds.
Robo-advisory firms have cropped up in Japan, Singapore, and Hong Kong catering to different niches of investors, FinTech news reports. JP Morgan Chase, Bank of America, Wells Fargo, Morgan Stanley, and Citigroup have released rob-advisors to date. Wipro is working to make its existing tools more effective by coupling the tools with predictive data analytics using Artificial Intelligence (AI).
To mention a few of the popular Robo advisors, they include Axos Invest, Schwab Intelligent Portfolios, Fidelity Go, and Betterment. Let’s see how a Robo-advisor provides advice on individual investment banking proposals in just a few clicks.
The Robo-advice process in Investment banking
It is explained in simple steps as follows:
- The customer submits relevant data through web or app
- The system maps the data to the risk profile linked to Strategic Asset Allocation (SAA)
- The customer receives suggestions for various financial instruments
- It simulates the forecast and helps to visualize the choice
- Further, it facilitates the customer to make essential changes
- It prompts the customers to buy
To summarize, the Robo advisors’ interface facilitates the investors to have one-click access to the portfolios. Robo advisors improve user experiences and customer service efficiency. This special feature attracts the investment banking industry toward its adoption at a faster rate.
It is inexpensive too. It requires low opening balances that almost all companies can choose and benefit from a Robo-advisor. Robo-advisors can handle sophisticated tasks like tax-loss, investment selection, retirement planning, and many more.
According to Ned Philips, CEO of the Singaporean Robo advisor, Robo advisors can expand the investment market. It offers a range of financial products and markets access to investors and facilitates to make varying amounts of investments. Moving forward, though Robo-advisors are attracting investment banking professionals and many more are interested to get acquainted with it, there are limitations still. Let us see the limitations too.
Robo-advice process limitations in investment banking
Robo-advisors is still a developing technology and comes up with its limitations. They are as follows.
- Though Robo advisors make the investment process convenient for the novice or non-traditional investors, it may not provide a full-scale financial plan beyond portfolio management.
- Robo advisors handle the mechanics of investing. However, the investment decisions are influenced by market trends, logic, and investors’ lives as well. But, these Robo advisors’ algorithms cannot account for live situations. Human insight is critical for an appropriate financial plan.
- Robo advisors’ algorithms suggest investment strategies depending on the users’ data input. It might fail to prevent investors from making poor investments or decisions. It includes unreliable borrowers, emergency funds, or loan guarantors.
Human insight is necessary for financial planning. But, a human-Robo combination can become a more viable planning strategy for the next generation investors.
Robo-advisors are simplifying the investment process, creating new jobs in digital investment banking, and helping the investment banking industry to expand its reach. It provides automated and algorithm-driven financial planning services that require little or no supervision from humans. Still, as a concluding thought, the human factor is essential for success in investment banking.