Robo-advisors in asset management : towards a complete automation ?

Like many service-oriented industries, the wealth management industry is dealing with significant technological and human changes. In this paper, we investigate the predominance of robo-advisors (RA's) to manage wealth over the traditional fund industry. The markets remain increasingly complex, competitive and are expecting better returns through the use of quantitative technology in finance. In the context where human behaviors are affected by emotions and cognitive bias, robots do not show such feelings and may make better decisions than traditional advisors. This paper examines the functioning of a RA and the opportunities it provides compared to a traditional advisor. We discuss the pros and cons of each, as well as a comparative fees study between three Belgian investment companies using this technology (Gambit, Easyvest & Key Private). Our conclusions lead to hybrid solutions which appear to be the best suited to merge the power and precision of the robots with the personalized recommendation of the traditional advisors.