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What Is an Automated Wealth Manager?

Students in an online MBA in financial services gain the in-depth knowledge needed to be effective financial advisors. An important aspect of this is developing advanced competencies with the many tools available.

Automated wealth management is one such tool, with digital wealth advisors (so-called “robo advisors”) becoming more common. So what is automated wealth management? And what does the increasing use of robo advisors mean for people and companies in the wealth management field?

How Does Automated Wealth Management Work?

Automated wealth management uses advanced algorithms to accomplish the same thing as human-based wealth management. Robo advisor software assesses a client’s financial goals, assets and risk preferences along with in-depth market data analysis to provide a personalized financial solution.

This may simply be financial advice and guidance. Or more passive clients may prefer robo advisors to automatically manage investments.

The Pros and Cons of Automated Wealth Management

The clearest positive aspect of automated wealth management is substantially reduced overhead (human resources, office space, utilities, etc.), which can result in far lower fees. And the efficiency and automatic nature of developing solutions for new clients means a low initial investment of provider resources. This can mean vastly lower minimum investment for the consumer. Together, these cost savings can open an array of services to the middle class — new markets for providers.

Another attraction is that clients can access their accounts 24/7 — a boon to working people who have time commitments and responsibilities during the business day. Plus, anytime online access and digital interaction are the norm for younger generations.

But, purely automated wealth management lacks the human element. Many clients value talking directly with someone and getting answers to difficult questions. Human financial advisors manage wealth even as they educate clients and help them through troubling times. Human wealth management requires empathy, relationship-building, and accountability.

Robo advisors are incapable of empathy. They are programmed to serve the client’s interests but cannot interact dynamically or make decisions based on a moral or ethical code. This is very important to many clients. Artificial intelligence (AI) has the potential to increase the ethical aptitude of robo advisors but certainly has a way to go.

How Will Automated Wealth Management Affect Human Financial Advisors?

Robo advisors are altering the role of human advisors in wealth management, even replacing them to a degree. Yet automated wealth management can also augment the human element, eliminating bias and human error as well as increasing efficiency and expanding consumer markets. Now, the financial advisor can integrate automated wealth management by offering hybrid packages.

Combining human financial advisors and robo advisors can increase the breadth of a client base and a financial advisor’s capacity to serve unique needs. The human advisor can spend less time on number-crunching and quantitative analysis and more time with people, helping them navigate troubling periods of market volatility.

This human interaction can lead to increases in both customer and professional satisfaction. Plus the lower overhead and scalable quantity/market-share potential of incorporating automated wealth management can make the industry more accessible to small business. Entrepreneurial financial advisors will benefit from taking advantage of this rapidly developing aspect of wealth management.

Automated wealth management is clearly an important area of study for current and future finance professionals, whether advisors, managers and administrators. The future of the industry lies at the intersection of automation, AI development and traditional wealth management. Finance professionals could do well to treat automated wealth management not as a negative disruptor but as a tool for increased effectiveness and success.

Learn more about UNC Pembroke’s online MBA with a Concentration in Financial Services program.


The Wall Street Journal: The Future Robo Adviser: Smart and Ethical? Automated Wealth Managers (Robo-Advisors): Financial Advice in 2018

Orange Business: Automation: Shaping the Future of Wealth Management

Medium: The Automation of Wealth Management

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