Robot advisors gain traction amid market turmoil

By Lee Min-hyung

The era of robot advisors, or “robo-advisors,” is looming closer with the rise of non-face-to-face financial transactions here and abroad.

It was not until recently that the software-powered asset managers started coming to the fore as a reliable substitute for human financial advisors. Robo-advisors utilize artificial intelligence (AI) and big datasets to generate objective and trustworthy financial services for customers.

According to KOSCOM, the number of robo-advisor subscribers has seen a rapid rise over the past couple of years.

Between Dec. 2018 and Feb. 2020, robot-driven financial products here saw about a threefold subscription growth, with more than 150,000 people signing up for these digital financial services. The numbers are continuing to rise.

Industry officials said the market for robo-advisors is still in its infancy, but will grow at a rapid pace in the next few years.

“We remain very optimistic for the future of the market, as AI-powered software will definitely generate more and more accurate analysis results by building up enough datasets,” an official from one of the nation's major securities firms said.

“In times of uncertainty, such as the current coronavirus-induced market volatility, stocks or any sort of financial product, including investment funds, fluctuate in an unpredictable manner,” the official said.

But robo-advisors are relatively less vulnerable to external uncertainty, as it makes decisions in accordance with objective, data-driven algorithms, according to him.

On top of that, the robo-advisor industry is expected to grow mainly due to its cost-efficiency. Securities firms can cut costs by launching the services, as they will continue to replace work traditionally done by human asset managers. Another reason for the rosy outlook is because robots can make predictions in real-time.

In Korea, four brokerage houses ― Mirae Asset Daewoo, NH Investment & Securities, Daishin Securities and Kiwoom Securities ― have launched their own robo-advisor platforms.

In particular, NH has so far rolled out four non-human, online-only asset managing services, the largest among the players.

“Our 'creator account' robo-advisor platform is particularly drawing a favorable market response, as it remains very agile to external circumstances by rebalancing portfolios after reacting to any shifts in the global economy trend,” a spokesman from the company said.

“Hundreds of customers have so far subscribed to the platform since it launched last year,” the official said.

One noteworthy characteristic of robo-advisors is that they offer stable returns to investors even at this time of virus-driven global panic, he said.

The robot-advisor can also be used in much broader areas beyond the role of asset manager.

Shinhan Financial Investment offers an AI-powered stock recommendation service for its customers. The service, dubbed M-Folio, can analyze companies' financial status and outlook in detail by using machine learning technology. The platform takes into consideration a number of economic factors, such as interest rates and stock price trends, before recommending the best portfolios for investors.