Automated robo-advisors use a platform to construct a client's risk profile and recommend investments accordingly. While they reduce the fees an investor has to pay and streamline the investment process, they lack the human touch of tailor-made advice.
Investment company FinEx has developed one service in Russia called "Financial Autopilot." FinEx Managing Director Oleg Yankelev told RBK that the product currently offers a free consultation to clients, helping them to assess investment risk and choose a portfolio of investments.
Financial Autopilot is aimed at small investors, who are able to form a portfolio with as little 100,000 rubles ($1,536). In the long term, the service aims to provide the services of robo-consultants for less than one percent annual commission, including the commission from brokers and depositary banks.
"All the effective robot consultants use only indexed products," said Yankelev, who explained that his company's product offers portfolio of exchange traded fund (ETF) investments traded on the Moscow Exchange, and also sends requests to partner brokers.
In addition, Russian banks VTB24 and AK BARS also offer similar services, which recommend a minimum account of 300,000 rubles ($4,612).
"This service uses not only ETF to form a portfolio, but also, depending on the aims of the client, chooses banking and insurance products," explained Yankelev.
RBK noted that Russia's Central Bank has expressed concern about the potential danger of robo-advisors. In February the bank's first deputy chairman Sergey Shvetsov said that robots could cause chaos on financial markets by giving their clients identical advice, and are also vulnerable to hackers.
"If I create a virus and I know that it will (cause the robo-adviser to) advise selling shares in Gazprom, I will sell them first, open a short position and make money. So interfering with the work of robot advisors will give rise to new forms of fraud," Shvetsov said.
According to research firm Aite Group, automated investment management companies are currently managing more than $50 billion in assets, and the industry grew by more than 200 percent in 2015.
Established corporate banks are also turning to robo-advisers. Morgan Stanley, which manages more than $2 trillion in assets, told shareholders in July that its new digital strategy will combine robo- and human financial advice.
According to a report produced last year by consulting firm McKinsey & Co, virtual advice centers offering digital, personalized financial advice from centralized hubs could potentially offer their services to approximately 42 million households worldwide. These consumers are already prime candidates for a virtual advice model, and comprise a market worth $13.5 trillion in financial assets and $66 billion in annual revenues.
