The rise of robo advisors: Can Wales lead the way?
by Lewys Aron, March 3
Looking at anything from construction to medicine, it’s hard to ignore the profound effect technology has had on our lives over the past few decades.
We can now construct cities, bridges and models in stunning 3D detail as well as cure previously incurable diseases. Technology has also put the world of investing at our fingertips.
We now have unprecedented access to stock analysis and can buy shares in the world’s largest companies in seconds. Despite all this, research by Lloyds banking group indicates that a mere 32% of UK households hold shares. This is compared to a massive 55% percent in the USA.
As with many things, the UK trails America in terms of technological investment in the financial sector. Over the past decade, there has been a huge spike of ‘robo advisor’ platforms in the US. And the trend has recently started to catch on in the UK.
What are robo advisors?
Robo advisors will ask you a series of questions based on your risk tolerance, financial situation and goals before suggesting an investment portfolio mix that suits you.
You can then treat these platforms as savings accounts where you deposit a sum monthly and let the robo advisors do all the investing work for you.
No complicated graphs or reports to read. One of the largest US-based investment platforms, Wealthfront, manages over $5 billion on behalf of clients.
The UK robo advisor market
Robo investment made its journey to the UK in a meaningful way in 2011 with the advent of the robo advisor ‘Nutmeg’. Simple to use, it’ll ask you your risk tolerance, your goals, how much you can afford to save and that’s it. It does all the legwork for you.
I think it’s fair to say that Nutmeg has had a mixed welcome in the UK, struggling to gain traction and announcing a £9 million pound loss in 2015.
This really raises serious doubt regarding the robo advice industry and suggests that there maybe isn’t an appetite for investing among Brits.
A really exciting development for Wales, namely Cardiff, is the rise of our very own Robo advisor platform, Wealthify. It’s stormed onto the scene with an edgy, modern-looking platform.
Wealthify has moved away from the corporate feel of current robo advisor platforms and has introduced a more social element. Its customers can earn fee discounts by encouraging family and friends to start investing through Wealthify ‘Circles’.
Only time will tell whether Wealthify will revolutionise the market, but what a development it would be for Wales if it managed to do just that. A strong believer in tech and innovation, I think it’s just a matter of time until there’s finally an innovation that will entice Brits into investing.
Lewys Aron is a Swansea-based financial blogger who managed to put away over £13,000 despite being a full-time student. He blogs about his experience, investing and general finance at Frugal Student. He recently launched an eBook on where to invest money in 2017