(Warner Bros.)
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Robo-advice might not revolutionize the financial advice space in the way some originally thought
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The future of the industry is not going to be purely robo, but rather we will see a rise in the hybrid model of financial advice
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Some of the benefits of the hybrid model include lower costs, and the benefits of human interaction
You might have heard that robots are coming for our jobs.
The rise of automation has been a conversation starter on Main Street and Wall Street alike, with high-tech replacing highly-paid jobs in everything from manufacturing to financial advice.
The rise of so-called robo-advice is a part of this trend.
Robo-advisers provide financial advice or portfolio management online or via a smartphone application. Rather than using human managers to build portfolios, they use algorithms to determine where to invest.
(Pure robos have been growing in triple digits since 2013Morgan Stanley)
The affordability of robo-advice platforms and their simplicity — many platforms allow clients to create accounts in minutes — have fueled their rise in popularity and growth.
Consider, for instance, the fact that pure robo-advice firms have witnessed triple digit growth since 2013, according to a team of analysts at Morgan Stanley led by Giulia Aurora Miotto. The bank predicts a $6.5 trillion market globally for robo-advice by 2025.
But despite the massive growth of robo-advice firms, the bank does not expect robos to usurp their legacy competitors — think someone like Charles Schwab — nor do they think they will completely replace human beings.
"We think robo-advice will be less disruptive than feared by incumbents, as brand and network remain king," Morgan Stanley said.
The bank identified a number of reasons why bots won't be able to topple legacy firms. One of the main ones is the fact that investors still need — and want — human financial help involved in their financial planning.
"The financial sector consumer often needs some sort of human contact, especially when abrupt market moves lead to unexpected losses," the bank said.
The note mentions a study that found investors cited "an advisers willingness to take the time to understand needs and goals" and "explain analysis clearly" as two of the paramount qualities in a financial advice provider.
In addition, there are many things that robo platforms can't do.
Grant Easterbrook has been following the robo-advice space since 2011. The 27-year-old founder of Dream Forward, a fintech 401(k) firm, told Business Insider that we still need human beings for things such as high-net-worth estate planning and managing other complex financial goals.