Fund managers should be part of the conversation in the design of algorithms behind robo-advisers – the automated wealth management platforms that have become popular in the last few years.

“That’s ultimately what we think will be the winning model, digital advice assisted with human advice. Fund managers need to be part of the conversation with the algorithm creators and effectively not watchers of what is going on,” says Tom Fortin, head of retail technology at BlackRock.

According to a report by consultancy firm Deloitte, the top 11 robo-adviser firms in terms of size collectively stood at US$19 billion assets under management (AUM) at the of end-2014. Data from research firm MyPrivateBanking Research predicts that the robo-advisory could hit US$255 billion in AUM by 2020 with clients looking to technology to boost returns.   

“Wealth managers are facing cost pressures and scale needs around the world,” says Fortin. “I think technological innovation in wealth management has been sorely lacking for the past 40 years.”        

In Japan, wealth managers such as 8 Securities are increasingly boosting its robo-advisory capabilities. Just last year the investment service firm launched “8 Now1” a robo-adviser service for Japanese investors.

Jeroen Buwalda, partner and Asia Pacific wealth and asset management advisory leader at EY believes robo-advisory will broaden market for financial advice due to its simplicity. “There are only about 1 in 5 people worldwide who have access to financial advisers,” he notes. “People that could benefit from financial advice are not receiving advice at the moment.”

“Most robo-advisers are creating ETF (exchange traded funds)-based models. They are doing this because they are low cost,” observes Fortin. “Robo-advisers have a mission to provide low cost quality advice.”

According to Buwalda, robo-advisory services have the potential to thrive as a number of investors are looking to centralize their assets. Based on an EY investment survey, 59% of participants expressed that they were likely or very likely to consolidate their assets with less wealth management providers. “Robo-advisers will give the wealth managers the opportunity to consolidate more assets,” predicts Buwalda.

However, the tendency of robo-advisers to recommend the cheapest trade meant they may not always provide the best advice.