Robo-advisors and Robo-Analysts are both important to enabling wealth management firms to cut costs without sacrificing quality of advice, but the importance of a Robo-Analyst to enhance the quality of investment advice shouldn’t be underestimated.
Today, many of the tasks performed by robo-advisors are low value-added services such as determining and communicating asset allocation strategies (e.g., 60% equities, 30% fixed income and 10% cash). In fact, these services are so low value-added that advisors cannot make money doing them unless they are bundled with higher value-added services. The value proposition of a Robo-Analyst is very different. That’s because Robo-Analyst technology empowers wealth managers to provide the kind of long-term, value-oriented advice that not only meets the fiduciary duty of care, but also provides peace of mind for both advisor and client. Specifically, by shining an analytical light in the dark corners of financial filings, Robo-Analyst technology can identify many critical data points overlooked by most research analysts today. No longer must investors rely on the headlines or management-manipulated earnings. With new technologies, investors can receive a much fuller, more comprehensive analysis of financial filings, company profits, and valuation so as to make better-informed decisions than ever before. As a result, Robo-Analyst tech raises the analytical bar universally, enabling investors to transcend the short-sighted and high turnover trading mentality that, in the long run, does more damage to investors than good.
Robo-Analyst Technology Brings Analytical Rigor Back to the Advice Business
It’s no surprise that the market has become more focused on headlines and management-manipulated earnings than economic earnings over the past 20 years. Management-manipulated (a.k.a. accounting) earnings are widely available for free. They maintain a large presence in the media and are the focus of the always attention-grabbing quarterly releases. On the other hand, economic earnings, the truly comprehensive view of corporate profits, are hard to find and rarely free, because they have historically required considerable human effort to calculate. To be derived with integrity, economic earnings require rigorous analysis of every annual and quarterly financial filing, cover to cover, that a company has published for several years. For those not familiar with these documents, they average over 200 pages, can be as long as 1,900 pages and are filled with complex accounting and legalese.
