{"id":5752,"date":"2022-06-06T08:46:00","date_gmt":"2022-06-06T08:46:00","guid":{"rendered":"https:\/\/ethis.co\/blog\/?p=5752"},"modified":"2022-10-18T06:58:54","modified_gmt":"2022-10-18T06:58:54","slug":"opportunities-threats-shariah-compliant-robo-advisors","status":"publish","type":"post","link":"https:\/\/ethis.co\/blog\/opportunities-threats-shariah-compliant-robo-advisors\/","title":{"rendered":"The Opportunities and Threats of Shariah-Compliant Robo-Advisors"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_51_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\" role=\"button\"><label for=\"item-69f76d59eefa1\" ><span class=\"\"><span style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input aria-label=\"Toggle\" aria-label=\"item-69f76d59eefa1\"  type=\"checkbox\" id=\"item-69f76d59eefa1\"><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/ethis.co\/blog\/opportunities-threats-shariah-compliant-robo-advisors\/#Advisory_service_preferences\" title=\"Advisory service preferences\">Advisory service preferences<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/ethis.co\/blog\/opportunities-threats-shariah-compliant-robo-advisors\/#Opportunities_for_traditional_advisors\" title=\"Opportunities for traditional advisors\">Opportunities for traditional advisors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/ethis.co\/blog\/opportunities-threats-shariah-compliant-robo-advisors\/#Future_opportunities_of_robo_advisors\" title=\"Future opportunities of robo advisors\">Future opportunities of robo advisors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/ethis.co\/blog\/opportunities-threats-shariah-compliant-robo-advisors\/#Opportunities_for_robo-advisors_in_the_HNW_High_Net_Worth_market\" title=\"Opportunities for robo-advisors in the HNW (High Net Worth) market\">Opportunities for robo-advisors in the HNW (High Net Worth) market<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/ethis.co\/blog\/opportunities-threats-shariah-compliant-robo-advisors\/#Opportunities_for_banks_to_implement_robo-advisors\" title=\"Opportunities for banks to implement robo-advisors\">Opportunities for banks to implement robo-advisors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/ethis.co\/blog\/opportunities-threats-shariah-compliant-robo-advisors\/#Bottom_Line\" title=\"Bottom Line\">Bottom Line<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Advisory_service_preferences\"><\/span><strong>Advisory service preferences<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According to a study conducted by the firm AT Kearney<a href=\"https:\/\/www.euromoney.com\/article\/b12klnvxmq0czx\/fintech-fund-managers-face-robo-adviser-threat\" target=\"_blank\" rel=\"noreferrer noopener\">, 3% of banked customers use a robo-advisor platform<\/a>. Also, after surveying 4,000 US consumers, nearly half of them expressed that they had some interest in robo-advisors. This is bound to put pressure on big banks that have wealth management divisions, in addition to smaller registered investment advisory firms.<\/p>\n\n\n\n<p>Uday Singh, a partner in the financial institutions practice at AT Kearney says that robo-advisors have been a classic disruption of advice. The main customer base is below 35 years of age with money to invest and adequate financial skills to work with a robo-advisor and have the realisation of not trusting a bank. One retail banker says, \u201cIt\u2019s come to the point where the younger American investor would rather trust a robot than a financial advisor.\u201d<\/p>\n\n\n\n<p>On the other hand, another<a href=\"https:\/\/link.springer.com\/chapter\/10.1007\/978-3-319-95999-3_20\" target=\"_blank\" rel=\"noreferrer noopener\"> survey conducted<\/a> shows that 77% of surveyed wealth management clients trust their financial advisors. Additionally, 81% say that face-to-face contact is important. There are<a href=\"https:\/\/link.springer.com\/chapter\/10.1007\/978-3-319-95999-3_20\" target=\"_blank\" rel=\"noreferrer noopener\"> further comments<\/a> that personal advisory services are still a much-preferred feature of financial advisors and they occupy the position that current robo-advisors cannot fulfill i.e. to adequately meet the needs of investors with complex financial needs.<\/p>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"Opportunities_for_traditional_advisors\"><\/span>Opportunities for traditional advisors<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/221-1024x536.png\" alt=\"Shariah-Compliant Robo-Advisors\" class=\"wp-image-5753\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/221-1024x536.png 1024w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/221-300x157.png 300w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/221-768x402.png 768w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/221.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption>Robo-advisors are not intended to replace human financial advisors but rather to work in tandem with them.<\/figcaption><\/figure>\n\n\n\n<p>Consulting firm <a href=\"https:\/\/slidelegend.com\/the-rise-of-robo-advice-accenture_59bb532c1723dd2da9b61940.html\" target=\"_blank\" rel=\"noreferrer noopener\">Accenture<\/a> is certain that financial advisors won\u2019t become redundant. Thus, financial advisors will continue to play a central role to wealth management, but robo-advisors will bring forth new facilities that wealth management firms will need to incorporate. In<a href=\"https:\/\/liye.info\/doc-viewer\" target=\"_blank\" rel=\"noreferrer noopener\"> Accenture\u2019s view<\/a>, robo-advisors will complement financial advisors, rather than replace them.<\/p>\n\n\n\n<p>In the same way,<a href=\"https:\/\/www.pdffiller.com\/474690452--EY-The-evolution-of-Robo-advisors-and-Advisor-20-model-\" target=\"_blank\" rel=\"noreferrer noopener\"> Ernst and Young<\/a> states that while robo-advisors provides an effective platform for investing, the value of the human aspect cannot be stressed enough.&nbsp;<\/p>\n\n\n\n<p>Similarly, according to<a href=\"https:\/\/www.cgi.com\/sites\/default\/files\/white-papers\/robo-advisor-automated-advice-platform-cgi-patpatia-white-paper.pdf\" target=\"_blank\" rel=\"noreferrer noopener\"> CGI Group Inc<\/a>, there is a trend in robo advisor services, where financial advisors are using computer programs to assist them in giving investment advice and managing client accounts. Therefore, the majority of investors with wide-ranging needs are gaining major advantages from this model (i.e. a hybrid advisory model providing digital advice for a digital world, but with humans steadfastly in control.)<\/p>\n\n\n\n<p><strong>Related: <\/strong><a href=\"https:\/\/ethis.co\/blog\/benefits-robo-advisors\/\">What are the Benefits of Investing via robo-advisors?<\/a><\/p>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"Future_opportunities_of_robo_advisors\"><\/span><strong>Future opportunities of robo advisors<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/231-1024x536.png\" alt=\"Shariah-Compliant Robo-Advisors\" class=\"wp-image-5755\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/231-1024x536.png 1024w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/231-300x157.png 300w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/231-768x402.png 768w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/231.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption><em>It is expected that rapid progress will be made toward the creation of an automated adviser assistant capable of providing complex advice.<\/em><\/figcaption><\/figure>\n\n\n\n<p>As mentioned by author<a href=\"https:\/\/www.investopedia.com\/terms\/r\/roboadvisor-roboadviser.asp#toc-how-robo-advisors-make-money\"> JakeFrankenfield<\/a>, robo-advisors are currently useful entry-level tools for millennials i.e. those with small accounts and some degree of investment experience, but far from adequate for those who require sophisticated services such as estate planning and retirement planning.<\/p>\n\n\n\n<p>In the near future,<a href=\"https:\/\/liye.info\/doc-viewer\"> Accenture<\/a> expects that the abilities of robo-advisors will considerably rise in competition, improvement and new technology. Upcoming versions will take into account the client\u2019s intricacies by adjusting questions based on previous responses.&nbsp;<\/p>\n\n\n\n<p>When creating a financial plan, robo-advisors will be able to incorporate several goals, including college savings, protection needs, planned home acquisition, retirement, estate planning and the need for health care.<\/p>\n\n\n\n<p>Over the next few years and beyond, Accenture notes that developing technologies such as perceptive computing will control major developments in robo-advisory abilities. Accenture expects a fast advancement towards an automated advisor assistant that will even be able to offer complex advice.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.cgi.com\/sites\/default\/files\/white-papers\/robo-advisor-automated-advice-platform-cgi-patpatia-white-paper.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">CGI Group Inc.<\/a> recognizes that the more sophisticated platforms with artificial intelligence can not only examine a client\u2019s behavioral profile but also estimate future life events and thereafter recommend methods for advisors to manage such events. Based on client needs and activities, the platform may even be able to identify potential areas for new product development.<\/p>\n\n\n\n<p>As summarised clearly in a<a href=\"https:\/\/www.worldfinance.com\/wealth-management\/is-robo-advice-the-future-of-wealth-management\" target=\"_blank\" rel=\"noreferrer noopener\"> video interview from World Finance<\/a>: \u201cIf you imagine an online solution that aggregates your financial data across your savings, your investments, your pensions; even your partner\u2019s financial status. And then uses an algorithm to create holistic advice based on all of your financial position, and based on your goals and ambitions, your tax status, your investments. I think that\u2019s potential what robo-advice the future is for.\u201d<\/p>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"Opportunities_for_robo-advisors_in_the_HNW_High_Net_Worth_market\"><\/span>Opportunities for robo-advisors in the HNW (High Net Worth) market<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Regarding the enthusiasm of HNW and mass affluent clients&#8217; in engaging with digital advice, MyPrivateBanking&#8217;s survey reveals: &#8220;The majority of affluent and high-net-worth individuals recognise the potential of robo-advisors and automated investment services to add value to their wealth management services&#8221;.<\/p>\n\n\n\n<p>In Accenture\u2019s 2015 paper titled \u2018Serving the High Net Worth Investor\u2019, it was put forward that not only would HNW investors rather choose digital engagement, but these investors also view robo-advisors as entirely complementary to a human to human relationship.<\/p>\n\n\n\n<p>According to<a href=\"https:\/\/www2.deloitte.com\/content\/dam\/Deloitte\/us\/Documents\/strategy\/us-cons-robo-advisors.pdf\" target=\"_blank\" rel=\"noreferrer noopener\"> Deloitte<\/a>, the best approach for HNW investors will likely be a hybrid robo-advisor model i.e. one that merges an excellent digital experience with qualified, human-led advisory services.<\/p>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"Opportunities_for_banks_to_implement_robo-advisors\"><\/span><strong>Opportunities for banks to implement robo-advisors<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/2411-1024x536.png\" alt=\"Shariah-Compliant Robo-Advisors\" class=\"wp-image-5757\" srcset=\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/2411-1024x536.png 1024w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/2411-300x157.png 300w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/2411-768x402.png 768w, https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/2411.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption>There is a significant amount of enthusiasm among investors for their banks to provide digital portfolio solutions.<\/figcaption><\/figure>\n\n\n\n<p>As shown by<a href=\"https:\/\/assets.kpmg\/content\/dam\/kpmg\/pdf\/2016\/07\/Robo-Advising-Catching-Up-And-Getting-Ahead.pdf\" target=\"_blank\" rel=\"noreferrer noopener\"> KPMG\u2019s own research<\/a> of 1,500 bank clients, investors have a strong interest intheir banks offering digital portfolio solutions. Banks would be negligent to overlook the opportunity of including robo-advisors in their product portfolios. Therefore, banks should act now to secure their share of the market, or else clients will sooner or later look for these solutions at other institutions.<\/p>\n\n\n\n<p>Uday Singh, from the financial institutions practice at AT Kearney confirms, \u201cUS banks need to adapt to capture future revenues in new ways. Where banks don\u2019t deliver the new kind of banking they seek, robo-advisors. increasingly fills the gap in the market, especially in the retail and affluent segment\u2026<a href=\"https:\/\/www.euromoney.com\/article\/b12klnvxmq0czx\/fintech-fund-managers-face-robo-adviser-threat\" target=\"_blank\" rel=\"noreferrer noopener\">There is a big opportunity here. The regional banks that already have the client base could easily tie up with a tech firm for a white-label robo advisor platform\u201d.<\/a>) Hence, there is a massive opportunity for local banks in the United States to include a new robo-advisory revenue stream.<\/p>\n\n\n\n<p><strong>Related:<\/strong> <a href=\"https:\/\/ethis.co\/blog\/islamic-fintech-and-islamic-banks\/\">Islamic Fintech \u2013 A Threat for Islamic Banks or an Opportunity?<\/a><\/p>\n\n\n\n<h3><span class=\"ez-toc-section\" id=\"Bottom_Line\"><\/span><strong>Bottom Line<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In the last few years, robo-advisor developments have brought about fears that advisors would be dismissed by technology. However, it has become certain that advisors are now considered highly important. An automated advisory platform is able to strengthen advisors\u2019 capabilities, making sure that clients are offered valuable advice.<\/p>\n\n\n\n<p>Robo-advisors provide an opportunity for investors who lack large amounts of money. It is an opportunity to receive services similar to a professionally managed investment portfolio. On the whole, Shariah-compliant robo-advisors have allowed the global Muslim community to take part in international financial markets by making investing both accessible as well as morally compliant. Robo-advisors are even open to non-Muslims who have an interest in ethical investing.<\/p>\n\n\n\n<p>As discussed, Shariah-compliant robo-advisors have the potential to offer an immense opportunity to many different markets including traditional financial advisories, high-net-worth (HNW) clients, and Islamic banks globally as well as those individuals\/banks keen to carry out ethical investment alternatives.<\/p>\n\n\n\n<p>The opportunities of the Islamic financial advisory industry will significantly rely on technology, and those firms that fall behind will inevitably fail to benefit. It is recommended that traditional Islamic banks should consider working together with fintech companies. Therefore, firms and Islamic banks should not be deciding whether or not they will set up robo-advisors, but rather when it should be done.<\/p>\n\n\n\n<p>Therefore, the adoption of Shariah-compliant robo-advisors have the potential to revolutionise the Islamic Finance industry through its positive integration as opposed to its feared future domination, providing major opportunities within the global Shariah-compliant advisory industry.<\/p>\n\n\n\n<p><strong>Related: <\/strong><a href=\"https:\/\/ethis.co\/blog\/5-entrepreneurs-halal-industry\/\">5 Entrepreneurs who are Making Waves in the Halal Industry<\/a><\/p>\n<div class=\"rns\" data-title=\"The Opportunities and Threats of Shariah-Compliant Robo-Advisors\" data-tags=\"\" data-categories=\"Shariah Compliant\" data-comments=\"0\" data-date=\"1654505160000\" data-author=\"Aneesa Ismail Rahman\" data-single=\"\" data-url=\"https:\/\/ethis.co\/blog\/opportunities-threats-shariah-compliant-robo-advisors\/\"><\/div> <!-- Check out https:\/\/reactandshare.com -->","protected":false},"excerpt":{"rendered":"<p>Advisory service preferences According to a study conducted by the firm AT Kearney, 3% of banked customers use a robo-advisor platform. Also, after surveying 4,000 &hellip; <span class=\"read-more-link\"><a class=\"read-more\" href=\"https:\/\/ethis.co\/blog\/opportunities-threats-shariah-compliant-robo-advisors\/\">Read More &rsaquo;<\/a><\/span><\/p>\n","protected":false},"author":63,"featured_media":5759,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":""},"categories":[2011],"tags":[],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/06\/21.png","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/pbDwgm-1uM","_links":{"self":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts\/5752"}],"collection":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/users\/63"}],"replies":[{"embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/comments?post=5752"}],"version-history":[{"count":3,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts\/5752\/revisions"}],"predecessor-version":[{"id":5763,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/posts\/5752\/revisions\/5763"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/media\/5759"}],"wp:attachment":[{"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/media?parent=5752"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/categories?post=5752"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ethis.co\/blog\/wp-json\/wp\/v2\/tags?post=5752"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}