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Robo-Advisors Are Coming. So What’s Stopping Them?


As technology continues its seemingly never-ending evolution, robots are taking over customer service and back-end data analysis. Combining those functions to create robo-advisors makes perfect sense.

In the financial sector, wealth management firms are expected to continue investing in robo-advisors and financial mobile app development, as these are seen as the most impactful technologies. Robo-advisors are currently experiencing an estimated annual growth rate of 45.7 percent.

However, there are major challenges preventing this anticipated growth. The financial field is subject to numerous regulations, and companies must remain constantly vigilant to stay compliant. These regulations are currently stifling the progress of robo-advisors.

The Financial Industry Regulatory Authority (FINRA) remains opaque regarding many of its rules, making it difficult for FinTech disruptors to navigate the regulatory landscape. Additionally, established institutions and regulators are resistant to change, preferring to maintain the status quo.

While robots are poised to make a significant impact in the financial services industry, regulatory red tape and slow industry progress are currently the biggest obstacles to their adoption. As robo-advisors reach more audiences, the market is expected to invest further, forcing regulators and big banks to accept the new robotic reality.

Machine learning and artificial intelligence have been operating behind the scenes in finance for several decades. Traders already use AI to pick stocks for their portfolios, and FinTech companies are working to integrate automation into their offerings.

Despite the challenges, some financial institutions are embracing robo-advisors. For example, Wells Fargo recently launched its own robo-advisor platform, and other large banks are also starting to adopt automated investment services.

Estimates suggest that “assets under automated management” could reach $7 trillion by 2025. As the amount of money that robo-advisors manage continues to grow, the financial services sector must make changes in corporate strategy, lower barriers to entry, and improve retirement management.

The robo-advisor revolution has already begun to disrupt the way investors engage with their accounts. From small-time savers to billionaires, more investors at all levels will continue to lean on automated assistance as time passes.

If the FinTech industry hopes to meet that consumer demand, regulators and major players must clear the way for disruption.

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