Science

Savings: robot advisors continue their breakthrough

(AFP / INA FASSBENDER)

This year, more than $1.6 trillion are controlled by these robots globally, and this share is growing rapidly.

Robot advisors, algorithm-driven financial advice, continue to attack depositors. They are mainly aimed at people who are not used to dealing with their investments.

Between two notifications sent by one of the many applications on the mobile phone, an automatic warning is given: “Beware, your investment is moving away from your goal. Do you want to rebalance them?”

After logging in, a few clicks are enough to change the distribution of your savings between euro funds, which are safer (consisting mainly of bonds), and equity funds, which are more risky: a robot advisor (or “robo advisor”) . advisor”) takes care of more precise redistribution.

In June 2021, a report commissioned by the European Parliament defines a robot advisor as “software operated by a financial intermediary. It is based on an algorithm and is provided to customers online.” It aims to automate financial management, thus reducing costs and offering low commissions.

Human advice, “not everyone can do it”

According to the statistics portal Statista, more than $1,600 billion are controlled by these robots worldwide in 2022. A drop of water in the world of financial markets, but this share is growing rapidly: outstanding debts were $300 billion in 2017 and could rise to $3,000 billion by 2026.

There are many solutions behind this term. This could be an additional digital tool to support clients, for example, for banks: in June, Societe Generale generalized “Financial Coach” for its clients, offering them “arbitrage advice” on their investments through notifications based on the positions of the bank. analytics. In its most advanced form, most often offered by 100% digital players, the robo-advisor arbitrages itself and ensures the balance between stocks and the Eurofund according to a strategy that is predetermined, but which can be changed at any time. time.

“Human advice is very good, but it is also expensive and not everyone has access to it,” explains Marie Brière, director of research at the first European fund manager, Amundi.

As part of a yet-to-be-published academic study, she conducted with Milo Bianchi, professor of finance at the Toulouse School of Economics, a study on the use of robotic advisors in the context of employee savings between 2017 and 2018. using Amundi data. They observed a “better performance” of around 2.3% per year on investments made this way compared to employees not using it.

Goal: “simplify the investment process”

“The robot is able to generate larger portfolio changes for small investors in terms of income and wealth, i.e. those who are less likely to receive traditional advice and participate in the stock market,” the article explains. For example, directs them more to the stock market, which is more profitable than funds in euros.

“For developers of robo-advisers, the goal is to “simplify the investment process” while providing access to the maximum amount of financial data,” adds Guillaume Lesage, COO of Amundi and, in particular, the division of Amundi Technology. They are better adapted to long-term management than investments aimed at quick profits in financial markets.

Among private traders who have started using robo-advisers, “some have returned because the strategy is so different from personally managing their investments. It’s much more passive” with investments like ETFs (Exchange Traded Fund) designed to replicate performance. index, explains Kemo Konate, author of a memoir about the people who withdrew their investment from robotic advisors.

“Companies need to be clearer on their promises” to avoid disappointment, he said.

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