Wealth Management and Automation

An industry known to have faced various challenges over the years, Wealth Management continues to be of interest to investors. The adoption of new technology, demographic changes and regulation have created speculation about the futures of the profession.

This transition for Wealth Management is not a new one; before electronic quotes were readily available, 30, 40 years ago. Wealth Managers served the purpose of giving you an idea and executing trades. Now, half of that proposition disappeared.

In today’s age, robo-advisers have shown to become a threat to Wealth Management. Easily-useable interfaces that can serve households in account openings, asset allocations, advise on risk tolerance – all with a very low-cost variable cost, had appeared to have replicated many of the functions of private banking. Yet, algorithms remain poor advisers: true advice, around financial planning for a household involves trade-offs. Advisers who can provide advice around trade-offs will continue to be very valuable.

Along with technological changes, Demographic changes will affect the industry. Currently, the average age for both financial advisers and their clients is increasing. For the first time in North American history, the oldest households are the wealthiest households, not to be confused with older households being wealthier, a trend that has persisted over the years.

Keith Knutsson of Integrale Advisors commented, “Automation is not only a change impacting lower-skill labor but is there to alter the landscape for many higher-skill professions, too. That being said, I believe that technology enables individuals to do more and does not serve as a employment concern for the financial services industry.”

Therefore, it remains important to be thinking about assets flowing down to other generations, which does not necessarily mean millennials; millennials might make up 22 percent of the households in the US, but they only own about 2 percent of the assets.

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