For most of the 20th century, investing was considered an exclusive activity reserved for either the superrich or behemoth financial institutions. However, things have been changing rapidly, particularly during the Covid-19 pandemic, with technological advancements playing a disruptive role in the financial advisory industry.

New normal

The Covid-19 pandemic was a watershed moment in accelerating the adoption and development of robo-advisers, which are platforms that rely on computer algorithms and minimal human intervention to provide investment advisory and manage portfolios for investors.

The concept of robo-advisers originated in the late 2000s, partly as a response from the industry to growing public distrust of traditional financial institutions following the global credit crisis. As the technology continued to evolve, the unprecedented market volatility during Covid-19 propelled more players to look for solutions that could provide bespoke financial planning advice and analysis.

The global robo-advisory market size, which stood at around US$12.02 billion in 2024, is projected to grow at a compound annual growth rate of 31.84% and reach US$109.75.8 billion by 2031, according to a 2024 report by Verified Market Research.

Another important factor driving the expansion is the advancement of technologies like artificial intelligence (AI), machine learning and big data analysis. Their integration into investment procedures allows robo-advisers to process large volumes of data more quickly and generate more accurate market predictions, further transforming the landscape of financial advisory.

Technological advancements have also greatly dismantled barriers preventing retail investors from participating in the financial market.

In the past, significant capital requirements and limited access to financial information and professional advisory made it prohibitive for most individual investors with limited resources to engage in the financial markets. However, the introduction of online brokerage, mobile trading apps and the proliferation of investment news on social media platforms have facilitated the rise of retail investors worldwide, particularly the younger generations.

Roughly 5 million retail brokerage accounts were opened in 2020, representing about 15% of US equity investors, finds a June 2023 Amundi Investment Institute report. Similar trends are observed in Asia, where tech-savvy millennial and Gen Z retail investors have emerged in young markets like Indonesia. While in more developed markets like Singapore, young generations have entered the market but old generations remain dominant players, notes a 2022 Kapronasia report.

Changing dynamics

The growth in the number of retail investors and the rise of social media platforms have been two intertwined trends that have significantly impacted one another, creating a mutually reinforcing dynamic.

A 2022 survey from BNY (BNY Mellon rebranded to BNY in June 2024) and the World Economic Forum found that 53% of retail investors consult social media for investment information. Additionally, the 2021 National Financial Capability Study Investor Report indicated that 60% of US investors under the age of 35 refer to social media information when making investing decisions.

The ubiquity of social media, along with fintech advancements, have contributed to changing investor behaviour in recent years. Retail investors can now use their computer or mobile devices not just to obtain instant market data, news and analysis, but also to connect with other investors to share investment ideas. In some jurisdictions, they can even take part in collective investment, as seen in the GameStop incident.

For more casual investors, social media channels, such as Facebook and YouTube, have long been the resources through which they can access insights and knowledge shared by experienced investors and finance experts. The content may cover a wide variety of topics ranging from value investing to day trading to other different perspectives and approaches to investing.

The use of social media has also altered investor behaviour. Studies, such as The Influence of Upward Social Comparison on Retail Trading Behaviour in 2023, show that these digital-first retail investors are more exposed to confirmatory information and the negative impact of upward social comparison, which can prompt them to take more risks and trade more frequently.

Navigating future

The evolving needs of retail investors have been putting tremendous pressure on banks, traditional brokerages and financial advisers.

In response to the demand for more interactive services and seamless customer journeys, many traditional financial institutions in Asia are devoting significant resources to enhance the capabilities of their own automated investment service offerings or to streamline their operations.

Incumbents in Singapore, such as OCBC Securities and DBS, have taken measures to adapt to the changing landscape. OCBC rolled out A.I. Oscar, its virtual trading assistant, to provide equity investment suggestions for Singapore, Hong Kong and US markets in November 2023. While DBS announced the consolidation of its equity capital markets, brokerage and digital exchange with its existing treasury markets business early this year.

Similarly, new players like Tiger Brokers launched TigerGPT, the industry’s first AI-powered investment assistant to provide intelligent decision-making support for its retail clients last year. The platform’s key features include the ability to perform personalised stock research to filter stocks based on investors’ pre-set criteria, as well as detailed sentiment analysis to distinguish positive from negative news about a company.

These digital transformations, in turn, cement the expectations of fast-trading processes, real-time data and content among retail investors. This can be evidenced by the 19% increase in total customer accounts at Tiger Brokers, from 1,845,869 as of December 31 2021 to 2,195,705 as of December 31 2023. Their swift and secure account opening process allows new accounts to be set up within two days.

So, what do all these changes mean for financial advisers in Singapore?

As in the progression of other technology, the reality is more complicated. While the emergence of robo-advisers has altered the financial advisory industry, human still have a role to play.

One model that has been favoured by many firms and clients alike is hybrid robo-advisers, which combines the efficiency, accuracy and stability of computer algorithms with the personal touch of human financial advisers. While the benefit of the former is obvious, the latter provides peace of mind to clients with access to real personal interaction when more complicated problems arise.

However, this also raises the bar for financial advisers’ services.

Faced with unprecedented volatility, investors are increasingly seeking diversified portfolio strategies. As a result, financial advisers have to expand their product and service offerings or collaborate with platforms that provide multiple assets and have the capability to innovate and introduce new products.

This evolution in product offerings necessitates that financial advisers upskill their financial knowledge and services to retain clients. While all investors prefer diversified product offerings, there are nuances between the investment preferences of younger and older generations. Younger investors tend to have a higher risk tolerance, whereas older investors typically favour asset classes that provide steady and safe income.

Further down the road, we expect the demand for a wider array of investment options and possibilities to persist and grow. To position themselves for success in an increasingly digital and data-driven trading environment, financial advisers need to embrace fintech and particularly AI tools to maintain their competitive edge.

Xuyang is a global partner at Tiger Brokers.