Companies like Betterment and Wealthfront are offering portfolio direction online without human involvement at a price substantially cheaper than portfolio management with an investment advisor. These firms are using algorithms based on modern portfolio theory, much like many investment advisors.

Considering that a sizable percentage of flesh-and-blood investment advisors rely on turn-key asset management programs and model portfolios, these so-called robo-advisors are delivering the same type and quality of money management service – but at an appreciably lower toll. What's more, lower fees mean that investment functioning tin be dramatically greater over the long-term due to the effects of compounding.

A tremendous degree of customer inertia (not to mention a burning desire to avoid awkward conversations) has helped substandard investment advisors retain clients for years, even decades. The advent of robo-advisor platforms means that it volition be easier than ever to transition between providers when functioning or other factors aren't up to snuff, and the platforms themselves may face a certain corporeality of client attrition without solid performance and an engaging interface. Nevertheless, the fact remains that online offerings agree a special appeal for a item type of client and since many new wealth creators are tech-savvy it stands to reason that the logic and appeal of these investment platforms will continue to increase.

Robo-advisors are just commencement to gain traction (last week Ritholtz Wealth Direction appear a new entry-level offer for young investors called Liftoff, created in partnership with California-based tech company Upside) and there's little doubt that they will be transformative in the investment informational industry. One area that is ripe for change is pricing. According to Hannah Shaw Grove, the author of Wealth Management: The New Business Model for Financial Advisors and a founder of Private Wealth magazine, "Digital advisor platforms will bring greater transparency to costs and will likely challenge the long-standing fee construction based on assets nether management."

A large and expanding segment of technologically sophisticated investors – including many of the NextGen inheritors – will discover robo-advisors a preferred option. At the same fourth dimension, some established investment advisors with older and aging clients (many of whom are Luddites) may exist able to consummate their careers without having to materially alter their business model. However, they too will probably require some adjustments to continue pace with changing expectations for accessibility and transparency.

Go on in mind that more sophisticated and responsive robo-advisors volition succeed the electric current generation of offerings. In the relatively almost future, the likes of IBM'southward Watson volition provide the processing power for portfolio construction that transcends the traditional methods used by long-only, hedge fund and individual disinterestedness investment operations and can incorporate a consummate range of securities, investment vehicles and assets. Moreover, the hereafter ability of robo-advisors to instantaneously sift through mountains of online data will enable them to recommend timely adjustments based on client-specific triggers such as the birth of the first grandson, a child's credence into an Ivy League college, the formation of a new business or a meaningful charitable contribution. "Perhaps even more than powerful," says Grove, "is the idea that apps and smart devices will become the primary touch points for clients, something that the large investment and financial services firms accept not yet fully embraced."

Are robo-advisors the death knell for today's investment advisors? Not quite. While innovative and cutting-edge, most of today'southward digitally-based offerings are yet restricted to the detached areas of bones planning and investing. People that want a more than comprehensive wealth management relationship will need a broader solution, the kind that has been perfected by seasoned wealth advisory professionals.

What'southward more than, individuals and families with significant and complicated assets can benefit from the bespoke services of a cross-disciplinary team of experts who tin ensure that things as diverse as concern interests, tax and risk mitigation strategies, cross-border issues, estate planning and philanthropic goals are all coordinated as role of their overarching investment approach, financial goals and personal priorities. "Robo-advisors have a DIY patina that doesn't suit extraordinary, circuitous wealth," explains Grove. "Until solutions are developed that can intelligently address the unique challenges facing millionaires and billionaires, it's unclear whether the high-end investor is a legitimate target marketplace for these digital platforms."

Still, unless investment advisors are content seeing their practices unravel they must acknowledge that the robo-advisors of today are merely a harbinger of what's alee: a confusing strength that will impact the industry at large and many of its component parts. Astute, forrard-thinking investment advisors will use this transitional menstruation to leverage applied science equally a way to enhance both their businesses and relationships while strengthening and reinforcing the role they play as advocates, educators, coordinators and partners. And, in doing so, may find their practices condign more streamlined and successful.