Robo advisers or not as the case maybe….?


My good friend has recently moved his life and business to Jávea in Spain. Jávea is a coastal town in the comarca of Marina Alta, in the province of Alicante, Valencia, Spain, by the Mediterranean Sea. Situated on the back side of the Montgó, behind a wide bay and sheltered between two rocky headlands. The area was first inhabited in prehistoric times, 30,000 years ago by cave dwellers on Montgó.

My role was to assist him on business structure matters in Europe, focus is incredibly important when you are transitioning life and business to a new country and environment.
We decided to take the weekend off and on the Sunday climb Montgó, which rises to 753 metres (2,470 ft). It is the last spur on the Cordillera Prebética Mountain Range. The mountain rises dramatically from the valley floors. surrounding it and dominates the skyline for miles around. Its craggy cliffs are home to some of the most unusual flora and fauna in Spain. The mountain is renowned for its rock formations, cliffs, caves and natural harbours. From the Xàbia side Montgó is often said to resemble the head and trunk of an elephant and a real endurance test in 35 degrees of heat!
We always have many high energy discussions and decided, as the hike up the mountain was 7km and potentially 5 hours of climbing by the cliff edge, that talking about human 2 human and robo-automation maybe a good way not to focus on the sheer drop of the mountain edge.

It is true to say that there has been about 35% of current jobs in the UK at high risk of computerisation over the following 20 years, according to a study by researchers at Oxford University and Deloitte. (‘The Future of Employment: How susceptible are jobs to automation’. Data supplied by Michael Osborne and Carl Frey, from Oxford University’s Martin School). Figures on UK job numbers and average wages from the Office for National Statistics and Deloitte UK.)
Whilst this is not 100% it can cause a level of insecurity when reviewing certain media and developments by companies for the replacement of humans.

A robot anesthesiologist designed by Johnson & Johnson is going off the market. Only three years after approval, the company has stopped production on the Sedasys machine due to poor sales.
The Sedasys machine was designed to provide anesthetic to patients undergoing routine surgeries. The American Society of Anesthesiologists was especially alarmed because anesthesiology is one of the riskier aspects of many surgeries. The machine, which administered the drugs while monitoring the patient’s vital signs, was originally considered for use on a number of surgeries.
Johnson & Johnson agreed to use it only for procedures like endoscopies, colonoscopies, and esophagogastroduodenoscopy. By mid-2015 it was being used in four hospitals. Apparently, that was not enough to justify its continued manufacture.
It’s always unsettling to think that a robot could put a whole profession out of a job especially when that profession involves years of training and expensive education. Apparently, no one is entirely safe. On the other hand, more and more people are facing astoundingly high healthcare costs. The Sedasys system cost one tenth as much, per procedure, as a human anesthesiologist.


We discussed another sector: financial advisers and financial services, where robo advisers could potentially override human competence in areas. Robo advisers do a great job of maintaining client portfolios. But that’s only one part of the job of financial management and that is why human advisers are not going away anytime soon. Traditional human advisers deliver the kind of personal, hands-on service that investors consistently say that they want.
Just as important, advisers are able to offer the continuing coaching to address the challenges clients face along the way – from market-volatility to cash-flow needs to ensure that transitory issues don’t devastate their long-term strategy.
Some critics point to supposed advantages of robo advisers. For one, they say that a passive, robo-managed portfolio will outperform a portfolio actively managed by a human. But that’s a matter of investment strategy, not an argument for going exclusively with digital advisers. Many human advisers might recommend passive investment strategies, depending on the needs of the client.

The need for human help

Ultimately, it’s all about what investors want and what they seem to want more than anything is the human touch. Many of the most successful digital platforms already include access to human advisers, while others are being retrofitted to serve as portals for traditional advisory practices.
That does not mean, of course, that there’s no market for digital services. Some traditional human-centered advisory firms, for instance, are adding digital tools to their offerings. But they’re doing so as a complement to the kind of personalized service that only they can provide to clients, not as a replacement for it. Creating and coaching households through the realisation of an optimal comprehensive financial plan still relies on the responsiveness and rapport only a traditional adviser can provide.

An interesting report by A.T Kearney state assets under management by robo advisers are estimated to increase 68 percent annually to about $2.2 trillion in five years, according to a forecast from the firm. About half of that is expected to come from money that’s already invested and the rest from non-invested assets. The robots may prove to be even better than humans at one of the most important tasks required of an investment adviser: knowing how to dodge taxes.

“The dramatic collapse of commission prices and the rise of automation means that institutional-grade tax-loss harvesting is now within the reach of all investors,” reads a blog post from robo-adviser pioneer Wealthfront, whose claim to fame is programming a robot with all the wisdom of professor Burt Malkiel.
There is no question that robo automation is an innovation, brought on by the millennials, there is significant value to efficiency if robots can execute customer lifetime value and brand customer loyalty. However, all of this raises some important questions. Like, could growth in robo-advisers among the fattest part of the demographics curve lead to more crowded trades and more tightly correlated markets? What are the implications for government from robots armed with “institutional grade tax-loss harvesting” strategies? Will the conference circuit become filled with awkwardly dancing robo advisers and robo sales traders? And will they play hookie during the breakout sessions to go shoot a round of golf with handicaps of approximately negative 40?

If we start seeing portfolios with 90 percent allocations to the Robo-Stox Global Robotics & Automation Index ETF, we’ll know something went wrong.

All of the aforementioned gives us plenty to ponder, I feel…….

Discover more from Freedom after the sharks

Subscribe now to keep reading and get access to the full archive.

Continue reading