Written by: John O'Connell
It can be lonely out there ... squatting in cyberspace ... just the buzz of incandescent bulbs, the tippity-tap of coders moving a pixel 'just to see what works'. Late nights, pizza boxes, and a seemingly never-ending list of acronyms and jargon to keep you warm. In a simpler time you thought full stack meant pancakes!
And then it dawns on you. This name, this name you came to view fondly – Robo Adviser – it actually wasn't a term of endearment, it was a way of putting you down. The incumbents, the empire, they had seen you coming and branded you oh so well. It grabbed the imagination of the press and now every article you read about digital wealth advice and all the good you set out to achieve is clouded in this Orwellian dystopia of a brave new world. Images of robots wielding algorithms overwhelm the message. The message that digital wealth managers are actually a really good and cost-effective way to manage investments.
The empire, the empire said ignore those robotic types, devoid of humanity and all hung up on asset allocation, crunching databases of fundamentals and behavioural psychology to find investments ... it's just a fad. It too will pass.
So how confused are you now? While the industry was busy ignoring you, four of the world’s five largest fund managers joined you. What? Yes, the empire, the very people that said it will never catch on, have ... caught on.
Major funds management powerhouses like BlackRock, Vanguard, Fidelity and BNY Mellon* have been busy. They have caught up to these upstarts, they've found fintech true religion.
World’s major fund managers find true religion
Source: Company websites and SEC filings, Investment News.
*BNY Mellon subsidiary Pershing partnership with Marstone.
Each of course is unique in their own way – open platform, vertically integrated, advisor intermediated, direct, and on and on – but they have a core true belief, a religion, that unites them ... using data to make asset allocation and security selection more efficient and more cost effective. Algorithms. Algorithms that hunger for data and consider many variables concurrently across multiple dimensions. Virtuous in their ability to aid mankind.
So it's not so much that the empire strikes back, rather, it is the empire is coming out to join you. Consider it an endorsement. A pat on the back. A sign that you are on the right track. A coming of age.