Robo advisory platforms have quietly moved from novelty to infrastructure. What began as simple ETF portfolios is evolving into something far more powerful: discreet, algorithm-driven portfolios built at the individual investor level, often embedded inside universal banks that already control distribution, data, and trust.
If this model scales successfully for the mass market, the implications for the traditional mutual fund industry are unsettling.
There is a moment in the Terminator movies when Skynet stops being a tool and becomes a system. It does not announce its intentions. It simply optimizes. Efficiently. Relentlessly. And at scale.
Robo advisory feels uncomfortably similar.
I saw an early version of this shift years ago. In 2019, I held an Asia Tech portfolio with OCBC (RoboInvest). It offered real-time reporting, automatic monthly rebalancing, and full transparency. Most importantly, the underlying shares were held directly in my name. Not in the name of a fund. Not pooled with other investors. Mine.
For a retail investor, this changes the experience fundamentally.
Robo advisory thrives in a world where personalization, automation, and direct ownership matter more. The machine does not get tired.
Performance is easier to understand. Costs are more visible. Reporting feels intuitive. Tax treatment, of course, depends on the jurisdiction, but direct ownership often gives investors a clearer line of sight into gains, losses, and dividends. For “mum and dad” investors, this feels less like investing in a product and more like owning a portfolio, without having to manage it themselves.
Now imagine this model deployed at scale.
If large banks can offer robo-managed, discreet portfolios to millions of clients, an entire layer of the value chain disappears. No fund wrapper. No transfer agent. No daily NAV. No fund board. Just algorithms, custody, and continuous optimization.
Over the next five to ten years, that could siphon a meaningful share of assets away from traditional mutual funds, particularly plain-vanilla equity and balanced strategies where differentiation is already thin and fees are under pressure.
From that perspective, the outlook is bleak.
The mutual fund industry was built for a world where pooling, standardization, and scale were advantages. Robo advisory thrives in a world where personalization, automation, and direct ownership matter more. The machine does not get tired. It does not argue in investment committees. It does not need a sales pitch.
So is this Skynet for mutual funds?
Not quite.
Because even Skynet had limits.
Algorithms rebalance portfolios brilliantly, but they do not explain markets during crises. They optimize risk metrics, but they do not manage investor behavior when fear takes over. They work well for listed, liquid assets, but struggle once portfolios move into private markets, illiquid strategies, or bespoke solutions.
They work well for listed, liquid assets, but struggle once portfolios move into private markets, illiquid strategies, or bespoke solutions.
This is where the fund industry still has a role.
Mutual funds are not just products. They are governance structures. They provide collective oversight, regulatory protection, and access to asset classes that cannot be easily discretized or automated. They embed judgment where algorithms rely on rules.
Robo advisory will dominate standardized, liquid strategies for retail investors. Mutual funds will need to justify their place through specialization, access, and expertise. Private markets. Thematic strategies. Outcome-driven solutions. Areas where technology augments decision-making rather than replaces it.
The tunnel is dark, but there is light ahead.
The fund industry will survive, but only if it stops pretending that distribution is guaranteed and accepts that transparency, discretion, and technology are now table stakes. Robo advisors are not here to destroy the industry. They are here to force it to evolve.
Christophe Santer is a columnist for Investment Officer Luxembourg. He serves as a consultant at Mangis Bay, a boutique cooperative of senior experts for the global fund industry.
