The evolution and implications of robo-advisors and their impact on traditional financial institutions

Abstract

The financial industry has long been characterized by tradition, human expertise, and personal relationships. However, it has undergone a significant shift in recent years with the advantage of artificial intelligence (AI) and fintech innovations. One of the most prominent manifestations of this transformation is the rise of Robo-Advisors, which represent a fusion of cutting-edge technology and traditional finance at the same time. Evolution of Fintech, short for financial technology, refers to the application of advanced technology to improve and automate financial services and Robo-Advisors. It brings many innovations, from payment processing and peer-to-peer lending to blockchain-based crypto-currencies. Among these innovations, Robo-Advisors stand out as a disruptive force in the asset management and financial advisory sectors. The research questions in this study were as follows. How are Robo-Advisors changing the traditional financial sector, and why do banks implement this technology in their daily operations? To answer the main research question, the following sub-questions were formed: What factors influence customers' decisions to adopt Robo-Advisors over traditional financial advisory services? For comparison to traditional financial advisors, the second sub-question asked about the positive, valuable, and negative aspects of using Robo-Advisors to manage investment portfolios. Empirical data was collected to answer these questions, during interviews with representatives from financial institutions, the study gained practical knowledge of how Robo-advisors function in a real business setting. The information about the legal issues and regulations sources was collected during the interview with the regulatory industry representative from FSA-FIN and ESMA. The research gained the necessary data and all questions were answered during this study.