As the growth of “robo-advising” gains momentum in the financial advisory sector at large, another industry study on the topic has considered the ramifications of the trend in wealth management.

As the growth of “robo-advising” gains momentum in the financial advisory sector at large, another industry study on the topic has considered the ramifications of the trend in wealth management.

Earlier this month, the Swiss firm MyPrivateBanking looked at how web-based wealth management providers offering automated investment services will become an increasingly important part of the industry, although still a small minority in the near and medium term (see here).

Meanwhile, an overwhelming 88 per cent of RIAs surveyed by Scottrade Advisor Services believe robo-advising is growing in the financial advisory arena, having an inevitable knock-on effect on the wealth sector.

(Robo-advising is defined by the firm as online services that use analytical tools to create financial plans or investment portfolios for investors.)

“As technology continues to permeate our everyday lives, robo-advising can benefit certain investors by providing more choice across the financial services marketplace,” said Matt Wilson, president and chief executive of Scottrade. “Additionally, advisors who leverage this concept will likely be able to add scale to their businesses by aligning client preference to solutions provided.”

Wilson added: “While average fees may come down at some point in a macro sense, it will likely be a result of helping more clients across various price points and levels of service.”

Of those who believe robo-advisors will change the industry, nearly half said it will put pressure on RIAs to appeal to younger investors, while 46 per cent believe investors will expect to see newer ways of interacting with advisors.

“Those new interactions could go a long way toward cultivating newer relationships with younger clientele,” the firm said.

However, two in three of those polled said online tools lack other benefits, with lack of human interaction - somewhat unsurprisingly - being the biggest issue for robo-advisors (80 per cent). Lack of knowledge transfer and of service were cited by 46 per cent.

“Life sometimes gets in the way, and clients may need varying degrees of help to prepare for new challenges which could include college savings, buying a home or retirement,” Wilson continued. “Markets – and uncertainty – get in the way as well. Regardless of where investors choose to get help with their finances, staying the course is important as can be seen from the 2008-09 downturn when holders of 401(k) accounts went to cash – missing a historic run-up.”

The Scottrade RIA Study polled 224 RIAs in a proprietary online survey from May 30 to June 30, 2014.