Leveraging technology for the DIY investor

This NICSA News guest blog feature was written and contributed by the NICSA Technology Committee.

OmnibusGovernanceRisk_photoOnline advice, while not a new idea, is a rapidly evolving space. For those inclined to “do it yourself” (DIY), the web now provides numerous sites where an investor can identify, analyze, and compare financial products.  Tools abound as well – retirement calculators, risk profilers, etc.  And social media chips in by providing access to the opinions and recommendations of others.    The DIY investor has never had more online options. Let’s take a closer look at this ongoing evolution and consider its impact on the market, with a focus on the growing number of options and level of sophistication currently available in online advice.

Online advice can take on simple manifestations like a retirement calculator or a fund comparison tool. More sophisticated tools such as aggregators detect patterns and make suggestions accordingly (“I see you go out to eat often…”). Newer tools go even further, to include rebalancing and algorithmic-based buy/sell recommendations.  With access to an investor’s financial transactions (banking, credit card, etc) combined with aggregated data analytics, the latest tools are capable of providing highly sophisticated investment advice.

The question with respect to online advice may not be whether it can replace an advisor (that is not likely), rather how much of an impact will online advice have? We have seen online tools have an impact in other areas.  For example, the ability to complete simple tax returns online has been available for some time.  Over time, this ability has been extended to ever more complicated returns. This evolution has not disenfranchised the tax accountant completely, but it has impacted the market. Similarly the future state for investment advice is evolving as web offerings proliferate and online advice tools become more sophisticated.  This Wealth Management article provides  further information and an interesting analysis on some of the latest online advice tools.

NICSA: 8400 Westpark Drive, 2nd Floor McLean, VA 22102 • Tel: 508.485.1500 • Fax: 508.485.1560