Assets under management by robo advisors are expected to hit $8.1 trillion US dollars by 2020, says a report by Statista. With less than a decade since their inception, robo advisors have made tremendous changes in the finance sector. As a result, several robo advisors have been developed to allocate, and manage various investments. Some of the notable changes that the application of this financial technology innovation has enabled include reducing the processing cost of investments, determining the most suitable investment amount and rebalancing of your portfolio.
Processing Costs Have Drastically Reduced
With the rise of game-changing fintech innovations like robo advisors, low-cost trades for personal investors are here to stay. A few decades ago, for you to sell or buy stocks, you had to call your stock broker and pay a steep fee. For instance, previously, you paid a financial investment advisor massive amounts of money to help build your portfolio, but robo advisors are doing it at a cheaper cost (about 0.25% of your portfolio per year). Therefore, competition and technological innovations have drastically reduced the fees, and the speed in market trading has increased too.
Lower Investment Capital for New Entrants
Robo advisors have allowed investors with small capital to invest in the financial sector. By using the zero minimum balance technology, enhanced robo advisors have given investors access to portfolio management which previously was reserved to individuals with higher capital balances. These means that more people can access quality investment options at a lower cost than the previous years and get to grow their assets.With lower investment funding requirements enabled by robo advisors, the investment market has seen increased competition, which has in turn provided greater access to many customers.
Rebalancing of Portfolios is Done Automatically
Robo advisors have automated the process of portfolio rebalancing. In the previous years, investors paid commissions every time they purchased and sold shares. Nowadays, using artificial intelligence and automation, robo-advisors can build and manage your funds’ portfolio. Furthermore, you can access your portfolio fund online at your convenience. The application allows you to manage your pension funds, track expenses and files your taxes without the assistance of a traditional financial advisor. Besides, you won’t be required to pay any fee during the rebalancing process.
Many people have embraced robo advisors with open arms. As one of the leading fintech innovations, robo-advisors are removing numerous barriers that earlier existed. At the touch of a button, the popular smart technology has allowed investors to manage their finances better and plan for the future.