Goldman Sachs readies to launch robo advisor
American multinational banking group Goldman Sachs is ready to launch a robo advisor, as it looks to make a digital entry to the small-investment market.
“Advisors struggle with small clients and what to do with them,” said Rachel Schnoll, the new head of Goldman’s FinLife CX, its RIA platform.
“One of the things that we’ve been thinking about adding … is a robo to help advisors.
“This is something that Goldman Sachs has actually built — we just haven’t deployed yet.”
The use of robo advisors is picking up pace within the finance industry. Mutual fund firm Vanguard recently announced a pilot to test a digital-only robo advice service.
The firm is allegedly mulling ways it can launch the service to market, with one possibility being within its Marcus online retail-banking division, which was recently folded into its investment management division.
According to a report by Financial Planning, it’s as yet unknown whether the technology will work entirely autonomously, or to assist alongside human advice.
While digital advice is gaining traction, many providers are taking a hybrid approach by incorporating live agents. This helps to provide a personal touch and ensure customer trust remain intact.
According to GlobalData’s UK Investors Survey, just 5 percent of millennials chose chatbots to discuss the buying and selling of investments— 95 percent preferred to speak to a human advisor.
While digital services can provide advantages in operational efficiencies, and potentially in reaching more customers, many respondents chose human interaction and expertise when making investment decisions.
That’s because traditional wealth managers have experience in recession periods and market volatility, while robo advisors may not be ready to tackle risks to client investments.
“It’s been clear for a while that Goldman is lusting after the mass affluent segment,” said William Trout, a Senior Analyst at Celent to FP.
“And why not? Goldman wants to balance its established sell-side and UHNW [Ultra high-net-worth individual] activities with a growth play. The mass affluent market is uber-attractive from a demographic and overall asset perspective.”
According to the Aite Group, robo advice has fueled an explosion in new discretionary accounts— an investment account that allows an authorized broker to buy and sell securities without the client’s consent for each trade— topping 27 million.
That’s close to double the 15 million from four before. Assets on digital platforms could top US$1.26 trillion by 2023.
“[Growth] will put further pressure on independent robo advisors,” Trout said. “But I also think it may be understood as a longer-term threat by more established players, who have built their business by serving mass affluent investors.”
To optimize its investment in this market with robo advisors, a report by Business Insider suggests a hybrid approach could strike the best chord, blending insights generated by algorithms with advice from seasoned professionals.
The result could be a balance between a low-maintenance, semi-autonomous service that feels personalized to each customer.
2 December 2022
1 December 2022