Robo-Advisors : a disruptive force in the wealth management industry

Abstract

The present dissertation examines the concept of Robo-advisors and management services providing portfolio rebalancing, dividend reinvesting and tax-loss harversting via automated algorithmic-based service. Such Roboadvisors are growing rapidly internationally especially in the United States and Guernsey, yet Malta is still lagging behind in terms of their awareness and participation. Thus, throughout this dissertation, it was necessary to assess whether Robo-Advisors should be implemented in Malta and what will be the economic impacts on the wealth management industry after implementing such Robo-advisors. This study provides an overview of the advantages and constraints that would be faced by the Maltese economy after Robo-advisors would be implemented. The concept of robo-advisors is introduced as an alternative to the services offered by the human financial advisors. An analysis of the start up capital costs, the operational costs and cost reductions incurred in fees when compared to the fees charged by human financial advisors was also done. This research adopted a qualitative research methodology in order to determine the viability of robo-advisors for the Maltese economy. A number of semistructured interviews were undertaken with individuals who were knowledgable in such a concept. Results were then analysed and discussed. The finding revealed that the main barriers in implementing Robo-advisors were the technological and regulation aspects. Despite the sceptisicm and conservatism towards a local Robo-advisor, suggestions of how Robo-advisors can still function efficiently and be successful were given.This contradicts the fact that Robo-advisors can replace human financial advisors completely in the future but it will help in establishing a hybrid between Robo-advisors and human financial advisors. The research study concludes that despite the consevatism shown towards such a concept, younger generations in Malta will eventually take on Roboadvisors in the near future. In conclusion the study suggests recommendations for further research on such a topic. Such recommendations include further awarness on such a topic, the regulations needed to implement Robo-advisors for Malta and the implication on human financial advisors after implementing Robo-advisors for Malta.