For those who lack extensive knowledge of financial markets and economics, managing wealth can be an overwhelming experience. With high minimum investment amounts and exceedingly high management fees, wealth management has traditionally been reserved for the wealthy. It is within this context that robo-advisory services emerged roughly ten years ago, seeking to simplify wealth management for consumers.

Enabled by a shift to passive investing, robo-advisors pose a competitive threat to the companies that have historically offered wealth management services. Due to their low-cost model, they are well suited for investors looking to simplify the process of investing and managing wealth. However, while they attempt to build additional products and services catered to the needs of managing wealth, they will face steep competition from established organizations. Already, firms like Charles Schwab, Vanguard, and BlackRock have launched their own robo-advisory solutions in order to remain competitive in the changing landscape.

Robo-advisory solutions are at a distinct disadvantage to wealth management firms since they are reliant on investment instruments that are controlled by established firms. Thus, disruption appears unlikely. However, entrants can still thrive by diversifying their offerings to include all aspects of financial planning and wealth management. In addition to focusing on growth, traditional wealth management firms advise their clients on where to free up capital needed for investment, and how to protect it through measures such as insurance or savings. To date, robo-advisors focus solely on growth. By expanding their offerings, robo-advisors will be better able to help investors.

At the same time, established organizations cannot sit idly by expecting to maintain their market dominance. To survive the rise of robo-advisors, incumbent firms will likely choose one of two strategic paths:

  1. Use robo-advisory services as a means to cater to existing customers in order to defend current market share.
  2. Use robo-advisory services as an engine of growth by reaching out to people who have historically been unable to access wealth management services. This would be in addition to addressing the existing customer base that finds traditional services overshoot their needs.

Investing money has historically been one of the surest ways to generate wealth and financial security. Yet many people cannot afford to hire a traditional wealth management firm, and they lack the time and expertise to invest on their own. Thus, while traditional wealth management firms will continue to lead in this space, robo-advisory solutions represent an exciting opportunity to bring more people to the table. Everyone has financial goals they wish to achieve. As the wealth management industry continues to transform and orient itself towards affordability and accessibility, these goals will become more attainable for more people.


  • Aroop Gupta
    Aroop Gupta