The Potential of Artificial Intelligence in Financial Management

As industries continue to digitalize, the investment industry has been no exception through the introduction of artificial intelligence via robo-advisors.

August 2021 , by YCPS Marketing & Communication Group

Given that societies all around the world continue to adopt solutions ushered in by the digital age, the importance of technology becomes more apparent with each day that passes. In everyday life, technological progress has introduced developments that have vastly improved the quality of life in various ways, such as the Internet of Things (IoT), 3D printing, mobile devices, etc. Beyond this, businesses across several industries have also largely benefited.  

Specifically, advancements in automation, robotics, and artificial intelligence (AI) are set to have an impact on the current landscape of the investment and asset management industry.  

Robo-Advisors, Investment, and Asset Management Industry  
Statistics show that the asset management industry has continued to grow despite the obstacles presented by the COVID-19 pandemic. According to an industry report, investments in the form of managed assets across retail and institution portfolios grew by 11%, which totaled 103 trillion USD by the end of 2020. The report also details that much of the growth can be attributed to activity in North America wherein a 12% increase resulted in 49 trillion USD, while other regions like Europe (10%), Asia-Pacific (11%), and the Middle East and Africa (12%) followed closely.  

Under the asset management industry, one relatively new segment is forecasted to experience tremendous growth: robo-advisors. Unlike traditional asset management, wherein finances are usually handled manually by institutions and individuals, robo-advisors are essentially AI-driven platforms that create investment portfolios and manage assets for users based on data analytics gathered via algorithms and patterns. While the idea of automated investment and asset management may seem complex, consumers have seemingly gravitated to the robo-advisor industry. For instance, Singaporean digital investment platform and robo-advisor Endowus saw client investment rise by almost 1000% over a 12-month period, while also managing to grow client assets by 670% within the same time frame.   

The Future of Robo-Advisors 
As reported by APN News, the robo-advisors market—bolstered by an increase in activity due to COVID-19—managed assets that totaled a value of 1 trillion USD, which is a 30%% as compared to previous years. Furthermore, growth statistics show that this figure is set to climb as early forecasts predict that market value will reach 2.8 trillion USD by 2025. Moreover, user statistics reveal that 140 million people entered the market shortly after the initial stages of the pandemic and that registered users will eventually total 393.7 million by 2023.  

While these figures reflect the potential of the robo-advisors market, the tremendous growth is also indicative of the increasing confidence that users have in technology. Although this trend suggests further development, one must consider the future implications that it presents.  

From a long-term perspective, the question will eventually become whether robo-advisors’ function will be as supplementary support, a feasible alternative, or a total replacement of traditional asset management. Considering that the developing segment’s value is dwarfed in comparison to the rest of the markets under the 103 trillion USD industry of asset management, an immediate future wherein robo-advisors becomes the primary option for financial investors is highly unlikely. 

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