The Roboadvisor fintech platform revolution

Written by : Tim Vasko | Published on October 15, 2016

Effective financial services are changing in a big way. The future is here now for wealth advisory firms, family offices, and any financial firms that are concerned about client service, portfolio management, and financial planning. The wave of what are known as “RoboAdvisors” will eliminate those firms and advisors who are not keeping up with technology. Which is a good thing.

It’s time for a collaborative approach to be taken with clients and their portfolios in their wealth management investment placement objectives. Like the “always-on” mobile phone culture that we are living every day, effective wealth and portfolio management means engaging with your clients’ financial health, like the iPhone is now engaging with measuring daily health.

RoboAdvisors have been coming on scene since 2010. Not only will these new technologies, and the firms that build and adopt them, drive down advisory fees, but they are increasing awareness of what clients expect in financial services. It’s about time!

FinTech (“Financial Technology”) Platforms are a new breed of solution to engage, upgrade, and help drive cost reduction, innovation, and inclusion in a new full circle to drive full disclosure financial services process. And, at the same time, drive better decisions for investors and Advisors.

RoboAdvisors are technology platforms that ensure better access to information and convenience to the ultimate end user, the investor. Advisers and firms are being forced to re-think, very quickly, their role in the wealth advisory market. The days of the wealth adviser holding all the cards close to his vest are nearly at an end. High advisory fees that cover high overhead, just like the challenging of the monopoly taxi’s had for decades, have all but crumbled.

Uber is a platform for a more efficient way to get a ride. FinTech platforms are a way to get a more efficient route to financial services – from RoboAdvice, payments, money transfers, and “social investing” , clients of firms now have better options of where to take their assets, and who the driver will be to get them down the road to financial prosperity in investing. While “self driving cars” haven’t quite taken over, just yet, you can bet the Uber trend for finding better wealth advisory services is here right now.

The “old school” white shirt, suit & tie, stylish cuff-link wealth adviser, who decides to only show select cards, while hundreds of millions of dollars of investor dollars evaporate in bad investments and hidden fees.

Time and again, firms have taken in funds, that benefit fund creators ("Issuers"), that have paid advisors, and firms’ substantial fees and commissions while thousands of trusting investors have paid for these costs, and losses, with their hard-earned nest eggs. Certainly, this does not describe the Wealth Adviser who wants to do right for their clients. However, in the last decade of wild private equity markets, we’ve seen a lot of abuse.

RoboAdvisor as a Service will not only help investors, but will help the best of the best Adviser’s do what they do best. It will happen with the three critical elements that seem to have gotten lost along the way – Trust, Transparency and Track Record of the firm and advisor – with social rankings of firms and advisors, verified transactions with full disclosures on issuers and investments, and a clearly understood fee structure.

As this Financial Post article warns, investors should always remain wary – unscrupulous advisors are still out there and are difficult to shut down. Fortunately, we have more than journalists to rely on now. They are computer based FinTech platforms called RoboAdvisors.

RoboAdvisors can make three significant changes in the market:

1) Drive down fees (e.g., Betterment, a RoboAdvisor started in 2010 charges approximately 25% of the going rate for any size portfolio).

2) Encourage financial services firms to upgrade their platforms to FinTech based systems, offering better, timely, more transparent information to clients. Alongside this, better access to advisers, and ultimately lower costs for the firm will make it possible for the best firms to remain relevant, and to compete based on the quality of service, access and information that their clients have.

3) Remove the fraud and greed from the system that we see from the failures that take investor funds due to non-disclosures. These tragedies have been made possible by complexity in legal documents, smooth talkers and hidden fees and agendas. Regulators do their best to keep up, however, under the radar operators have cost the investors and industry billions. Such operations damage the industry overall – while “trusted” advisers and diligent fund managers are left to carry the legacy of those kicked out of the industry.

FinTech platforms that are fully connected, from every email, to every call, to every disclosure, encourage the regulators to participate via “always on” information access.

Ensuring there is a platform solution that has a copy of data, audit trail, and that captures emails, documents, and data – regulatory line of sight to clear disclosure and operations opens up transparency inside firms. This type of automation will rebuild the trust in the industry.

Tim Vasko

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