May 27 2020 | AtoZ Markets –Scandinavian millennials looking for investment advice at the biggest Nordic bank have been introduced to a robot. These clients have now embraced robot bankers over their human peers due to the COVID-19 pandemic, according to regional banks Nordea.
However, now that the bank relies less on humans and more on automation, how effective is the Nordea bank Nora robo advisor?
How is the Nordea Bank Nora robo advisor effective?
Nora, the robo-adviser that Nordea Bank AB launched back in April 2018, has already been asked to start investment processes for thousands of people who get savings advice from the bank each year. Nordea wants to use Nora to help expand that figure to about 2 million people in a few years.
Talking about its effectiveness, Nora has brought in an impressive 40% more business in the last quarter than in the same period last year. The bot also outstripped its human competitors at the same bank, who were relegated to helping established clients scramble to manage their tanking portfolios amid the coronavirus financial crisis.
Nora also did more than just protect the bank from the downturn – millennials flocked to her over human financial advisers. These mostly first-time investors even went on opportunistic buying sprees. However, it was only the 60+ age group who wanted a human adviser to "hold their hand through the panic," helping them frantically sell off their holdings as their value cratered.
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Why Scandinavian millennials prefer investing with a robot banker
Millennials may be investing with robots not because they especially trust the bots, or even because the COVID-19 crisis made bankers less accessible – Nordea mainstay Sweden, for one, didn't undergo the lockdown seen in other countries – but because they come without the overheads and psychological baggage associated with human bankers.
Nora's rollout came with access to low-cost investment funds. This is a fact that probably served as a more powerful draw for millennials than the novelty of investing with a robot banker. You do not have to pay robots a commission. What is more, any fund that lets the investor keep more of their money is going to appeal to first-time market participants that don't have an existing relationship with an advisor they trust.
Millennials presumably trust robots not to open millions of fake accounts in the names of actual customers. Some human bankers working for US bank Wells Fargo did this in a decade-long spree of institutional fraud that became public in 2016. The Wells Fargo account fraud scandal finally led to a $3 billion settlement earlier this year.
They also likely believe robots won't engage in what's ironically known as "robo-signing". This is an illegal practice of authorizing home foreclosures without verifying the legitimacy of the underlying loans that reached its catastrophic peak during the 2008 crisis. Yes, millennials have learned to trust robots to be fair and impartial, a step above the venal humans populating the financial industry.
Bottom line
Remember, you can always pick up the phone and talk to your financial advisor. The value of a two-sided conversation is worth its weight in gold. While some robos offer “customer service,” your call goes to a call center. An advisor might be at the other end, but they won’t be your advisor you have a relationship with.
Along those same lines, an advisor can provide insight that a robo can’t. Emotions can cloud the judgment of even the most battle-tested investor. The urge to sell during a downturn or chase after underperforming stocks is human nature and can be hard to fight on your own. A human advisor can help clients balance emotions with practical advice and judgment.
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