Analyzing the Importance and the Role of Robo Advisors in Banking

Ashish M. Shaji

10 Sep, 2022

The need for Robo Advisors (RA) was realized during the financial crisis a few years ago. Today, robotic wealth management solutions have become a common trend. Many companies have inducted RAs as a consulting tool for consumers.  

What is a Robo Advisor?

Robo advisor is a digital platform that provides automated, algorithm-driven financial planning services with minimal human intervention. A typical Robo advisor gathers information from customers regarding their financial situation and their future goals through a survey and uses the data to offer advice and automatically invest consumer assets.

Role of Robo Advisors (RAs) in Banking

RAs have many qualities that make it vital in today’s financial environment. It can satisfy the varied needs of financial service customers. The role of RAs in banking can be multi-fold, and considering what it brings to the table makes it worth investing in.

Transparency, low priced accessibility, and web-based experiences are some of the qualities of RAs, and it is also what the customers desire in the financial services sector.   With the adoption of RAs in banking, many traditional banks have revaluated the design of their front line services.

Banks have an added advantage over financial service firms as they have a large customer base. The induction of RA in banking will create an avenue where investment services can be provided. A bank with the services of RA provides a way to grow the relationship with young, emerging investors and court them as their investing and banking need to evolve and grow.

RAs can enable banks to provide account support to customers on a larger scale than before. This way, banks can add a number of customers before they reach the minimum asset requirement to be eligible for full-service advice.

Why is there a need for blending Robo advice with banking?

The following points necessitate the need for blending Robo advice with banking:

• Customer demand for platformafication

In banking, customers are the real king, and the banks tend to satisfy their needs. It is a known fact that customers want to have it all in one platform, both investment and banking. This is revealed by a report which revealed that 45% of consumers prefer not leaving their primary bank as far as investing is concerned.

• Maximum returns

Blending Robo advice with banking is one of the ways of controlling the client’s free cash, which is critical to locking in the client relationship and even gaining more share of wallets from the client.

• Scalability

RAs are considered excellent when it comes to providing account support at scale. It is a unique platform for reaching out to thousands of customers before they have enough assets to be eligible for full-service advice.

• Banks have changed

Banks have transformed massively in the last few years. They are no longer stodgy institutions built on inflexible with old infrastructure. In fact, they have become digital. It really sums up the need for blending Robo advice with banking.

Robo Advisors vs. Financial Advisors

In this segment, we compare the benefits accruing from Robo and Financial Advisors. It will help you to choose wisely.

Robo advisors with an essence of human touch

Banks are looking to find the right balance between human touch and algorithm interactions. Many financial institutions and companies have adopted this, where they make no bones about including the human touch in their services. It corresponds to the natural inclinations of millennials who started with digital technology.

Don’t forget personalization is the key to Robo advising. Banks that make efforts to personalize their services can expect an increase in sales and transactions, not to forget the increased customer loyalty and satisfaction. Therefore it is better to have a human-like back up as it will make things easier to manage as well. 

Conclusion