The wealth-management industry, before technology came on the scene, did a good job of serving two constituencies: rich people and those of modest means.
The former is obvious. Wealthy individuals and their families have complicated financial needs that are well met by expensive advisors, who bring investment prowess and tax fluency. Counterintuitively, perhaps, those with little wealth have the opportunity of investing simply, wisely, and cost-effectively through low-cost mutual funds offered by the likes of Vanguard and Fidelity. They don’t get much, but they don’t need much either. And what they get is good.
The group that’s gotten the shaft is what the fund-management industry calls the “mass affluent.” They are rich enough to have options for their investments—which they typically screw up by following the advice of too many charlatans eager to separate them from their money—and are too poor for wealth managers to profitably offer them guidance.
This leads us to the latest installment of how software changes everything. A new crop of so-called “robo-advisors” is good news for the mass affluent and those who aspire to become so. These are new companies and products that manage wealth by algorithm, thus combining low cost and—this part is key—prudent decision-making.
Until now a bevy of startups have dominated the fledgling field, and they have cleverly focused their efforts on millennials, they of little but growing wealth and a proclivity to live digitally. Fortune’s Jonathan Chew paints the landscape well in a feature in the current issue. The way you know the startups are onto something is that now giants like BlackRock (BLK) and Charles Schwab (SCHW) are getting into the act.
Robo-advisory is a nascent field, and its business impact so far on the big fund managers is negligible. But it’s one of those things that just plain makes sense. It gives people of some means a way to use technology to manage their money far better and in a more disciplined fashion than they’ll ever do themselves. If like many people you feel insecure about how you’re managing your investments, check out the new possibilities. You won’t even have to tell the software thank you.
This article first appeared in the daily Fortune newsletter Data Sheet. Subscribe here for a daily dose of analysis from Adam Lashinsky and a curation of the day’s technology news from Heather Clancy.