Will robo-advisers take over investment decisions at family offices?


Here’s a trend that may be of concern for all those investment experts working for family offices — the evolution of the robo-advisers.

OK, it’s probably nothing to get too concerned about right at this moment, but at the same time certainly something not to ignore. Robo-adviser is a term that’s popping up more these days in the world of fintech.

The professional services group EY thinks that robo-advisers will be one of the biggest influences on asset management in years ahead. Here’s what a recent report by EY said about robo-advisers. “Featuring online tools and virtual advice fueled by algorithms, these low-cost, automated advisory platforms, offered by both established firms and new technology start-ups, very effectively target the lower- to middle-income segments of the market, which is arguably over 80% of the population in many economies.”

So, if this technology is designed for the lower end of the market, robo-advisers will have little influence on sophisticated investors and certainly not family offices — right? No, and here’s why. Some smart people are already working with multi-family offices to develop robo-advisers for the ultra-high net worth.

A German start-up called Liqid has teamed up with HQ Trust, one of the biggest multi-family offices in Germany in terms of assets under management, to launch a sophisticated robo-adviser. The new platform calls itself a digital family office and Liqid says its platform offers a new generation of private wealth management. Liqid uses a bunch of advanced algorithms to construct portfolios with all the bells and whistles any sophisticated investor would want, but does it with very little human involvement. This cuts the cost of asset management significantly and at the same time, says Liqid, improves performance.

Of course, tech platforms for the ultra-high net worth aren’t something new. Some Family Capital readers in the US might remember MyCFO. Set up by the tech entrepreneur James Clark in 1999, MyCFO was designed to be a virtual family office. It was sold to the Chicago-based Harris Bank a few years later and was rebranded Harris myCFO. Despite the fact that it’s still in existence, it’s probably fair to say that the technology it offered wasn’t a game changer.

Maybe Liqid won’t be either, but technology certainly has the potential to be a game changer for family offices just as much as it does further down the investment scale. For this reason it should not be ignored by family office investment specialists.


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