Trading has always been about speed and volume. In the world of stocks, bonds, and futures just a matter of seconds might mean thousands of dollars made or lost. This is why the moment to moment work of trading is often handled by algorithms in this day and age, but technology has focused on the details. Now robo-advisors are widening their view and helping guide firms and individuals as they plan their long-term investing strategies. As artificial intelligence develops these advisors are becoming more and more attractive since they are far more sensitive to the millions of variables that can shape a market than a human could ever be. Of course, AI is still far from the point where it can completely match humanity in terms of overall comprehension.
The first thing to note is that those who think that robo-advisors are ready to replace their human counterparts are a little off base. Firms are being more conservative than many futurists assumed and haven’t committed to robo-advisors yet. It seems that the pace that automated startups have been popping up has outstripped the demand. The industry looks over-crowded at this point, and you can already see ill-prepared startups failing as they struggle to stand out in such a competitive field. This is typical in a gold-rush environment, everyone wants to strike it rich quick, but not everyone will be able to stake their claim to a profitable vein.
Still, while some startups are facing disappointment, the industry as a whole is growing at an amazing rate. It’s projected that robotic advisors will be controlling $1 trillion dollars worth of the global economy by the year 2020. If that wasn’t enough, in just two years more, it could quadruple to more than four and a half trillion dollars!
Right now, automated investment advisors are most dominant in the North American market. This runs against the stereotype that Asia is always ahead of the technological curve, but projections show that countries like China, South Korea, and Japan are catching up quickly. By 2022 the Asian market’s speed of automation may surpass North America’s.
Currently, the robo-investment market is something of a Wild West. It’s uncharted territory, and plenty of people are staking claims on territory that may or might not end up being profitable. Things are fluid now, but we can already see that some firms are pulling ahead of the pack. Eventually, most startups will fall away, and a few companies will stand above the rest as the established leaders. There might still be room to get into the market, but the window is already closing quickly for the smallest startups. As the wealth controlled by automation grows, more and more established firms will enter the arena and drive out smaller companies that are struggling at the margins.