Many bankers are starting to embrace robo advisory. Wayne Patenaude, the chief executive of Cambridge Savings Bank, went against the norm and rather than hiring a team of traditional financial advisors, he decided to partner with SigFig, a robo advisory startup in San Francisco.
He is not alone. Bank of America and Wells Fargo will deliver their robo advisory products in the next year, which is a groundbreaking shift in the wealth management business. Other big names in the U.S retail banking are expected to provide robo advisory platforms. Tim Sloan, president and chief operating officer at Wells Fargo, commented that they are simply giving what customers are demanding, which is to manage their assets on their own time. Regional and foreign-owned banks, such as Capital One Financial, U.S. Bancorp and UBS are also following the same path.
Compared to traditional wealth management firms, robo advisors only manage a small part of the market, about $45 billion. But, it has the potential to attract the mass affluent and young professionals between 25 and 45 years old.
Meanwhile, some banks plan to provide hybrid advice to their customers, who may want to have it. New technology and new customer attitudes are the main drivers of robo advisors, but robo advisors still have to be tested in market downturns to eliminate skepticism. Either way, many believe robo advisors will not replace advisors, but enhance the work of financial advisors.