How can investment managers leverage robo-advisory services to streamline advice , asset allocation , portfolio rebalancing and tax strategies ?
Jamil Jiva , Global Head of Asset Management , Linedata : Robo-advisors are fully automated digital platforms that offer investment guidance and portfolio management services based on algorithms and statistical models . Their services include client onboarding , investor screening , implementing investment strategies based on the risk profile and their ongoing monitoring and evaluation .
These platforms use mean-variance optimisation to create portfolios and have the ability to automatically rebalance them based on target weights as well as provide tax-efficient solutions through tax loss harvesting .
Robo-advisors became popular with the Internet-savvy Millennial and Gen Z populations by allowing real-time access to their accounts via website or smartphone apps and providing low-cost and diversified investment solutions , all via the click of a button . Their popularity has even grown amongst clients in their mid-40s .
Robo advisory was in its infancy , but the combination of ML , advanced optimisation and Gen AI now enables personalised advice that is both at the level of expectations of the advisors and their clients .
For example , our personalised portfolio solution can manage several thousands of funds across several equity classes to build portfolios that meet customer constraints and investment preferences .
AI is used in particular to explain the allocation and to recommend the funds that best meet the expectations of the clients during portfolio creation and rebalancing , leveraging all the information we have on the client ( demographics , risk profile , preferences , constraints , objectives , past investments , tax constraints , etc .), on the market and each product .
Additionally , Gen AI can now provide additional investment and financial advice to the clients leveraging the knowledge base of the investment firm . The advisor augmented with a Gen AI copilot and AI-based portfolio recommenders is the advisor of the future .
Cost advantages have created a significant momentum for robo -advisors , as it has contributed to financial inclusion . It is a great complement to investment managers , as it allows them to serve a bigger client base including the mass affluents and affluent investors whose investing needs are not very complex .
120 August 2024