There may be greater high-end wealth management market potential for robo advisors than meets the eye, a report by Advent and an executive at SS&C said.

Despite perceptions that the low-cost, automated portfolio allocation tools offered by “robo” platforms only suit clients with relatively simple investment needs, these providers are beginning to move up the value chain, Advent said in a recent report.

Robo-advisor firms are beginning to invest more heavily in “sophisticated capabilities” with the view of automating complex tasks that are perceived to require a “human touch” - areas such as retirement planning, trusts and estate planning, according to the report, entitled Robo Advisors: Client Portals and the $30 trillion opportunity.

With larger players such as Charles Schwab, Vanguard and Fidelity moving into the robo space, and venture capital money “flooding in,” the pace and reach of those service developments is “only set to increase,” it said.

“With enough time and effort many of the processes behind various investment needs can be turned into rules-based engines that the end investor will be able to manipulate on their own,” Steve Leivent, senior vice president of advisory client experience at SS&C Technologies, told Family Wealth Report (Advent was acquired by SS&C earlier this year).

“For example, today, many of the online education savings calculators offered by 529 providers are pretty effective,” Leivent explained. “These applications take data regarding how much the investor has saved, current monthly contributions, and how much they expect to pay for college, and through probability simulations, they suggest how the investor should adjust monthly contributions to hit the goals and flag shortfalls.”

He continued: “In theory, comprehensive retirement planning and estate planning could eventually be boiled down to similar rules-based engines with a great online user experience. The power in providing more specialized solutions like this, combined with existing robo-advisor capabilities, is the investor’s ability to immediately implement changes such as increasing automatic monthly contributions in a few clicks after learning that goals aren’t on track to be met.”

The lesson for advisors, Leivent added, is that investor preferences are in the early innings of a change.

“The next generation of clients are looking for on-demand, self-service solutions to access whenever it’s convenient for them,” he said.

“In order to effectively compete, traditional wealth managers should look to the robos as a model for things like streamlined account opening processes, and digital communication and reporting tools. Robo-advisors likely won’t always just be for start-up investors. As their capabilities mature, so will their target client base, bringing more assets and more complex financial needs. Advisors are going to have to introduce similar digital capabilities to compete.”

Expanding on the aforementioned venture capital trend, Leivent said the amount of VC investment being funneled into the emerging robo-advisor space is “one salient reason why we are encouraging wealth managers to get ahead of the ball when it comes to their own technology infrastructure.”

“The robo offerings still have a very small slither of the marketplace, but no one can deny that there is a great deal of interest from VCs that could help move this technology forward at a faster rate than expected,” he told this publication.

It has been widely acknowledged that robo platforms can offer “traditional” wealth management firms a way to create a “more rounded” investment offering, and therefore appeal to next-gen investors and their different service expectations, Advent's report also said.

It noted, however, that the very personalized, flexible and complex capabilities that a human advisor can provide will remain an important value-added service.

“This is especially true at the ultra-high net worth end of the scale, where some advisors may feel best equipped to focus,” it said. After all, robo platforms are merely one manifestation of the broader technology trends sweeping across the wealth management sector globally, it added.

Last week, a different report by TABB Research said that the value proposition of robo-advisors is not a threat to the high-end wealth management sector as these players are constrained by the very factors that make them so desirable.

“Traditional” firms are fighting back by making significant upgrades, while others have partnered or made acquisitions (BlackRock is buying San Francisco-headquartered FutureAdvisor, for example), the report said (see here).