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Robo-advisors: Rise of the machines
Are robo-advisors a threat to their traditional human counterparts? The role of artificial intelligence in portfolio management is still relatively nascent and limited in scope — by the end of 2014 robo-advisors managed just $19 billion, according a recent Citi study — but that is changing.
Already robo-advisors like Betterment and Wealthfront are proving the space has massive potential. Even the big boys are getting on board: Last month BlackRock bought FutureAdvisor, and now National Australia Bank (NAB) is introducing an online platform called “NAB Prosper” that will allow customers to receive free computer-generated financial advice.
So how big of a problem are robo-advisors to their meat-based rivals? Well, it’s a $90 billion problem, according to consulting firm AT Kearney, which says that’s how much advisor revenue the robots will be assimilating by 2020 as their AUM creeps to $2 trillion.
And don’t assume robo-advisors will stick to wealth management and stock market algorithms either, there is already a VC firm that has had a robot on their board for a year. Advisors across all asset classes cannot afford to stick their head in the sand. Before you know it a C-3PO-in-a-suit could be eating your lunch too.
Photo: Clint Budd