Robo-Advisors Is Witnessing a Huge Spike in the MENA Region

August 10, 2022

As per a recent Oxford Risk study for behavioral finance professionals, wealth managers in the Middle East and North Africa (MENA) foresee substantial growth in the number of Robo-advisors and digital-only asset managers

Areej M Alturki
Areej M Alturki
Founder, Nakla

Robo-advisors are online investing platforms that use a set of questions to determine an investor's appetite for risk. They then allocate investors a customized investment portfolio of exchange-traded funds or index funds using automatic algorithms. They often offer lesser fees than traditional financial counselors and asset managers.

According to the report, one-third (34%) of autonomous investment advisors and wealth managers in the Middle East and North Africa (MENA) estimate the number of digital-only solutions to expand considerably by 2025. Another 45% anticipate a little spike in the number of Robo-advice and electronic options, while 21% anticipate no change.

The expansion projections are based on the epidemic's impact on technology adoption across the area, with lockdowns and limitations prompting businesses to discover new methods of working.

More than two-thirds (68%) of money managers believed the epidemic had expedited the MENA wealth management sector's technological transformation. Nevertheless, one in every eight (12%) people believe the epidemic had little effect.

"A recent poll found that 89% of financial advisors feel that Robo-advisory is a danger to traditional guidance." Meanwhile, over half of US clients are ready to forsake human knowledge in favor of Robo Advisors, according to Ebrahim K Ebrahim, CEO of Fintech Robos.

He claims that Robo Advisors provide the holy grail many fintech companies seek: a link between good innovation solutions and a low-cost strategy. "The cost of starting and operating a Robo-based savings and wealth management company is approximately five times cheaper than that of a conventional wealth management organization, posing a challenge to existing major financial advice firms."

Despite this and the fast growth, just a few Robo Adviser firms have demonstrated revenue and profit, which may indicate the challenges associated with this business model. A rising number of industry experts believe that, as convenient as new technology is, it will not render human investment managers obsolete anytime soon. As a result, many traditional-minded customers are dubious of the prospects of Robo-advising.

So, how would the scenario unfold, and will Robo Advisers be around for a long time? Some believe that the future of Robo Advisors will be human. Some anticipate that the destiny of wealth management would be a mix of robots, automation, and conventional in-person advice solutions, with investors moving between them.

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