Investors dump traditional money managers in favour of automation
The days of a fund manager being the sole handler of personal wealth have long been left behind by many young people looking for good investments.
Robo management, which uses algorithms to handle investments or pull together savings products, offers efficiency, fast market reactions and simplicity that are proving irresistible. Of course, few of us want to do away with human contact, so many robo firms offer phone-based advice alongside their automated offerings.
Whereas previously young investors would have needed to sign up with a money manager and trust their judgement, they are turning to such firms’ ever-improving computing power - and other generations are also showing strong interest in the new investment opportunities. Market data company Statista forecasts that between now and 2021, the value of global assets under robo management will increase from $225 billion to $1.06 trillion.
A perfect example of a business using robo management to take an investment lead is Goji, a platform that provides investors with a hub for to invest in a variety of corporate loans. Investors can choose between risk levels, and Goji allocates their funds.
“Unlike stocks and shares where you buy based on a unified data set, with private investments there are many different platforms. We use automation to aggregate data, and to make it easy to access different asset classes and bring them alive,” explains Jake Wombwell-Povey, chief executive at Goji, highlighting the technology’s appeal.
It’s important to have real human relationships and intellect, and that’s what people like when you’re working with their data and their money
The company uses human judgements - but computerised data analysis carries out the heavy processing. This combination is essential to investors, he says: “A lot of people talk about the big differentiator being tech, but we think it is actually the trust on top. It’s important to have real human relationships and intellect, and that’s what people like when you’re working with their data and their money.”
Meanwhile, WiseAlpha provides online access to high quality corporate bonds and loans. It uses automation to manage its many borrowers’ diverse portfolios. “We’re open to people who have as little as £100 to invest in the bonds of British giants such as Debenhams and Virgin Media,” says Rezaah Ahmad, the company’s founding partner and chief executive.
Asked why such automation-based investment is proving popular, he explains: “Previously this market was only accessible for people with over £100,000 to invest per bond. We’ve made it open to everyone by buying the bonds ourselves and dividing them into affordable sizes.”
Mr Ahmad says people are “increasingly confident” about automation, and the company is soon to launch its own customer robo management tool. He explains: “People may know what kind of investment they want, but they don’t want to choose new products and move money regularly, when a robo manager can manage it on a day-to-day basis.”
Wealthsimple eyes opportunity in ‘under-served’ UK market
Wealthsimple, a large robo investment manager founded in Canada, recently launched in the UK.
Toby Triebel, the company’s Europe chief executive, is confident that British investors will take up its promise of easy money management and lower cost services.
“The UK is very underserved in terms of financial advice. There are approximately 5.5 million people with money to invest but no access to advice, either because they are too small for financial advisors to take on, or because they don’t want to pay exorbitant fees,” says Mr. Triebel.
Wealthsimple manages investment portfolios for people after they complete a risk appetite and financial questionnaire. For those investing under £100,000, the company’s fees are only 0.7 per cent, around two percentage points less than traditional human advisors because of the lower operating costs from automation.
Nevertheless, there is a human connection at Wealthsimple that investors like. “We use technology to make the onboarding process as fast and seamless as possible, and additionally provide our clients with the opportunity to speak with an accredited investment adviser whenever they need,” Mr. Triebel explains.
Wealthsimple has 40,000 clients in North America, who have invested a total of approximately $1 billion. For anyone worried about the staying power of new robo players, there is no question, according to Mr Triebel. “We’re making long-term bets and being patient in what we’re building. We have $100 million of backing, from a financial services conglomerate with $1.4 trillion of assets, and we’re definitely here to stay in order to make smart investing accessible to people.”
These services are available on bud, an app that will bring together information from across a user’s financial products.
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