The big investors of the 80s and 90s depended heavily upon financial advisors because the information necessary for making a good investment was not readily available anywhere else. These were people of a generation where good communication with a bank was necessary in order to feel that trust existed between person and company. For these people, it was not just money that talked — it was important to have a person who talked, too.

This generation, the generation that made private equity a massive figure in the public consciousness, was the baby boomer generation.It is surely no coincidence that as the investment industry enters its most recent phase of change, the baby boomers are slowly dropping out of the picture. As these investors retire and their wealth moves into new spheres — their children, younger business partners, and similar — companies are finding that there is a cognitive dissonance between the existing financial advisors mostly in their mid-fifties and part of the old world of investment, and the new holders of the money to be invested, who haven’t got the appreciation for old-fashioned communication that their parents’ generation had. On the contrary, the new generation of investors seems to have little interest in what was once a major aspect of trustworthy financial investment. one-on-one, real life interaction between the investor and the person helping them to invest their money. For the up and coming generation, face to face communication does not have the same appeal it once had. The financial advisory industry is facing a new challenge: the so-called Robo Advisor.

A Robo Investment Advisor, by definition, is a wealth management service that is able to provide advice without recourse to human financial advisors or planners; essentially, it is an algorithm that allows people to invest according to the advice of an intelligent machine, without having to depend upon or interact with another human.

The algorithms that drive Robo Advisors are the same ones that human financial advisors have used for years. But through the Robo Advisor, it is simply possible to cut out the middle man. It’s easy to see the appeal in a culture that has shifted so much in an online direction. Many of the up and coming advisors are part of Gen X and the Millennial Generation. A Generation that can barely remember a time before the internet. To them, there is no inherent value in face to face communication over online interaction. Where the Robo Advisor wins is in its simplicity, its accessibility — and in the fact that it gets rid of many of the fees and expenses incurred by a traditional financial advisor.

Continued in part 3…