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Online financial advice as good as in-person advice

Anuradha Shukla | May 15, 2014
Companies leverage technology to undercut competitors, according to a Forrester report.

One-third of US online affluent consumers agrees that online financial advice is as good as in-person advice, according to a newly released report by Forrester.

Increase in popularity of digital financial advice is apparent as only 22 percent of these consumers were ready to accept online financial advice three years ago.

Previously, the managed accounts market was dominated by advisor-based brokerage firms, agent-based insurers, asset managers, and private banks.

A significant percentage of this market is now taken over by digital investment managers who are still limited in size, but have strengthened their position in this arena. These investment managers offer diversified portfolios via web.

Free or low-cost guidance is provided by startups like Jemstep and Personal Capital who help consumers to achieve their long-term financial goals. Typically, online investment services are customized to individual investors and offered at lower prices and lower account minimums than those of incumbent firms.

Crowdfunding sites
There are various crowdfunding sites that are expected to make an impact on small-business lending, venture capital, and alternative investments.

These sites such as Indiegogo and Kickstarter match people in need of capital with investors who want to support them.

Online consumers are also turning to social lending marketplaces such as Prosper, and Zopa that have generated about $6 billion in loans globally since 2005.

Social lending marketplaces are becoming popular but Forrester advises platforms to overcome consumer skepticism, lack of resources, and regulatory challenges.

Social insurance platforms such as jFloat, and Peercover have to overcome obstacles related to regulation and capital capacity. These platforms also have to overcome lack of customer awareness and confidence as most investors still want to interact with a human being.


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