In this "View From The Field," we deep-dive into one of our ten venture predictions as outlined in our 2024 Outlook Report.

2024 Prediction #1: Robo-advisors will make a comeback on steroids! Personal finance management solutions will cater to a more diverse audience and gain popularity again as FinTech solutions are armed with AI models. 

We all remember when robo-advisors first popped onto the scene in the early 2010s. They were the rebels of finance, part of a movement to replace all humans inside traditional financial institutions. We had already seen massive Wall Street trading floors wiped out by electronic trading systems and now Silicon Valley was going after the private wealth management business. New robo-advisors were luring investors with their fancy iterations of the Black-Litterman model and one-size-fits-all solutions using low-cost ETFs.  

Access to financial advisors had traditionally been restricted to those with great wealth. Early robo-advisors were all about making investing a breeze, giving automated advice without the hefty price tag, and dramatically reducing hurdles to access for all levels of investors.  Companies like Betterment and Wealthfront quickly gained traction and appealed to a new generation of tech-savvy investors, raising hundreds of millions of dollars from VCs.  

Big-shot financial institutions noticed (and feared) the robo-revolution and wanted in on the action. Large banks and brokerage firms ultimately began collaborating with and acquiring robo-advisers to drive engagement and efficiency. This evolution marked a shift toward hybrid models, combining automated algorithms with human advice to offer a more personalized and comprehensive client experience while providing big banks the ability to move downstream and acquire customers earlier in their lifecycle. Despite some early success, these solutions generally fell flat on expectations, providing limited growth and adoption in their current state.  

Fast forward to today, with the advancements in AI, the next generation of robo-advisors are doing more than just using simple inputs and algorithms to park our cash. We are seeing a shift towards hyper-personalization, where algorithms consider not only financial data but individual behavioral traits. This dynamic approach to personal finance management sets them apart from static, one-size-fits-all investment strategies that traditional solutions still utilize. By harnessing the power of AI, robo-advisors offer tailored, real-time portfolio monitoring, automatic rebalancing, and predictive analytics. This empowers users to make informed decisions in an ever-changing financial landscape while factoring in individual values and life events. 

In an effort to engage and educate users, new robo-advisors are beginning to incorporate gaming elements, making the investment process more interactive and enjoyable. This ultimately contributes to increased financial literacy and encourages investors to take a more active role in their portfolio. Think: virtual portfolios and simulated trading environments, allowing users to practice investment strategies without risking real money, ultimately building confidence to invest more. Robo-advisors can offer rewards and incentives for achieving educational milestones. Ongoing engagement with users in the form of push notifications that include bite-sized financial tips, market updates, and educational content is already becoming the norm. Robo-advisors are creating a future where everyone will have their own private banker at their fingertips regardless of their economic status.  

The robo-advisor of today will not be the end-all-be-all solution for all asset classes- some will always remain constrained. However, by embracing technological advancements, automated customization, and responsible investing practices, robo-advisor platforms are set to foster an inclusive and sophisticated investment ecosystem. 

All the best, 

John N. Ailanjian, CFA
Managing Partner

Caleagh Creech
Director, Direct Investments

Abhipriti Velamakanni
Senior Investment Analyst