Robo: Existential Threat or Necessary Evolution?


In 1998, during the peak of the dot com boom and only a few short years after Al Gore invented the internet, I was an executive in the private bank of a large financial institution in the Southeast.  We were staring at the opportunity to begin to utilize technology as part of our client service delivery, and at the same time intimidated by the change that would lie ahead.  I led a team that created one of the first integrated wealth management strategies in the industry, and our business model has been replicated many times over in the last 20 years or so.

At that time, there were many on the team that thought that the interwebs were going to eliminate the need for investment advisors, as discount brokerage and online trading removed any incentives for clients to pay fees for investments and advice.  It may be hard to believe, mutual funds were mostly loaded and available from wirehouses and brokers, and the trust companies and private banks basically owned the fee for service business.  In fact, our investment advisory fees were entirely bundled and not that much higher than the average fees are today.


Fast forward...

And rarely a week goes by without an article pronouncing the ‘death by robo’ of our industry.  If you can sit back and take it all in perspective, Robo investment management (it is NOT advice, folks) is just another component of the evolution of the industry.  It is the direct result of Silicon Valley running out of other things to disrupt - so they turned our way.  And, it is good for our industry.  In fact, necessary.

I think the article below, from the Buttonwood Blog of The Economist, does a nice job of illustrating some of the reasons why we must embrace automation, analytics and artificial intelligence in the investment management aspect of our business.

The Investment Management Industry Faces a Big Squeeze, The Economist


Let’s face it, BETA is FREE!

Or, at least almost free.  And in a low return world, where taxes, advisory fees and trading costs have an even higher relative impact, advisors are realizing they have a real issue in terms of long term cumulative investment return.  But it has taken over 20 years to get here, so there is time to evolve the advice industry without fear of being hit by a proverbial ROBO TRAIN.

We must embrace ever more efficient ways of doing business, and evolve our delivery to meet the challenge.  Investments are becoming commoditized to a certain extent, but advice is what our clients pay us for – just ask them!  Thus, we must institute robust, efficient and cost effective investment programs, outsource the heck out of that part of the practice, and focus on what clients really pay us for – ADVICE.


For more thoughts on ways to evolve your investment approach visit



Other recommended reading:

What’s Next For Robo? by Lauren Foster, The CFA Institute Blog


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