Digital advisors came about just as the great recession just began. As firms were forced to cut costs, they saw artificial intelligence backed financial analyst as a cheap solution to sustain their income in a tough period.
The early proponents launched services of digital advisors that were comparably cheaper than the their human counterparts. It was no surprise that the rise of the digital advisor industry would take the financial world by storm.
Since then, many the industry underwent many changes. The market has expanded considerably. Features and services offered grew. And many more personalities continue to influence different styles and philosophies. As the mobile industry developed along with it, digital advisors have become unrecognizable from what it was when it started. Today, app-based digital advising services have become accessible in a tap of a phone screen.
Nowadays, it has become apparent that the digital or robo advisors is here to stay. Many organizations have offered their own iteration of the service. Even non financial companies are offering the same services. Here are a few predictions for the digital advisor technology for the year of 2019.
Human financial advisors fighting back
In about a decade ago, financial planners ruled the financial world. They were almost untouchable and being a successful one would need more than just an ivy league MBA. And most importantly, they were expensive. Today, however, by being forced to compete with a machine that basically offer its services for free, financial planners are forced to cut their service fees to more reasonable margins.
They are now trying to prove their worth to a financial climate bent on saving every penny by cutting off the middlemen. It seems to be working in recent years though as even CEOs of digital advisor companies admit that it is all simply a fad and that the interest stems from the richest individuals probably wanting to simply experiment.
However, the digital investment trend is getting more complex and have crossed boundaries beyond index fund investing or portfolio rebalancing. Platforms with more advanced natures will be lead by smart analytics and encompassing risk analyses to go further than the usual investment portfolios. Summing it all up, it should produce much better results from sound advices that are specifically tailored for investors and with better risk management solutions.
A new market for digital advisors
The surge of immigration in the US estimates an additional 8 million more muslims in the US by 2050. Currently, there are already 3.45 million muslims in the country which composes up to 1% of the total population.
One tenet of the Sharia law, the doctrine which muslims abide on, prohibits interest collection. This means that it is forbidden to receive interest accrued from a payment by a borrower to a lender. As such, islamic banks and other institutions are wary of ventures that offers such. Sharia law also discourages investment in companies that sell haram. These include tobacco, alcohol, weapons and swine.
Some digital advisors are now being reprogrammed, repackaged and sold as a Sharia compliant version. They sometimes label these different versions as halal portfolio options. And several islamic institutions as well have created their own versions of digital advisors that were developed with complete compliance to Sharia in mind.
There are also other niche markets that the digital advisor industry can go into. Stock only investment portfolios, christian investment portfolios and those that are focused on a gender and/or a race.
Banking will deep dive into the digital advisor industry
Digital advisors have already taken other areas of financial management by storm. Banks, keen to take advantage, have taken notice and started offering loans to these digital advisor backed investors.
The banks may also plan to push the envelope further by integrating their customer accounts with digital advisor platforms. They can choose to integrate their debit and credit card services with partner digital advisor services.
More and more digital advisors are also looking to move into the banking sector to further expand both their legitimacy and their market space. Even newcomers, and mainly app-based solutions are now taking a foothold in the banking industry through the current trend. All of these digital investors will have firm competition against traditional financial services that have taken a foothold in the banking sector.
Digital advisors will contribute to sustainability
Investment giants see a sustainable future with digital advisors, their existing portfolios and their current sustainable management firms. It can be noted that more than a quarter of all the investment dollars are being injected into socially responsible investing.
More and more investors are wanting to join in on the revolution to save the planet earth. They clamor that their assets should be aligned with efforts that to slow down global warming, looking for alternative energy source and ensuring clean drinking water for everyone in the foreseeable future.
The digital advisors come at a time where investors have become more socially aware. This creates a demand for iterations of the technology that shows a quantifiable social impact in their investments.
Non-financial companies will release their own digital advisors
There is a growing interest in the non-financial market of digital advisors. Currently, several digital advisors have already been released from this sector. Some companies are offering affordable financial services through a monthly subscription with no minimum investment requirement. These services are often acquired through the internet with no representative from the selling company. These apps are greatly simplified and often only asks three categories in which to put in the customers’ investments. These are conservative, which yield low returns but are considerably less risky. Aggressive which give high returns but are more risky. And moderate which is halfway between the two. Customers can also choose to build up its own portfolio through their company stocks but currently, trading these stocks is not a feature.
The current trend in finance see a rising interest from every sector in automation. It will not completely wipe out the need for a human touch but will elevate the use of human instincts to manipulate financial outcomes through decisions made from thoroughly processed data.