Robo-advice 2.0 - “The Next Generation”

As assets under management grow, robo-advice is proving more than a flash in the pan in a bull market. How can established financial institutions successfully develop a next generation robo-advice offer? The answer lies in leveraging their long-term strengths to create personal, relevant, differentiated services for real people. Robots may help deliver Robo-advice 2.0. But it cannot be designed by them, or for them.

The Proposition

Established financial services providers have the opportunity to retain existing customers - and to acquire new ones in new market segments - by ‘logging on’ to the latest form of digital wealth management: “Robo-advice 2.0”.

What do we Mean by 'Robo-advice'?

Robo-advice is a catch-all term applied to investment services using online platforms to reduce – or even eliminate – the need for human advice. Yet robo-advice is not universally impersonal. Types of approach include the purely formulaic, as well as forms of low cost and simple initial product selection. But they also extend in some cases to greater depth of personal, tailored advice.

The Customer Proposition and the Underlying Technology

It is important to distinguish between the customer proposition and the technology when discussing robo-advice. Often, the quick, simple, low cost investment solutions are easy to buy conceptually and the technology makes the buying process accessible. Successful development of Robo-advice 2.0 will not be based on extra technology bells and whistles. At its core will be personal, relevant and differentiated services for real people. The technology is the medium. It is not in itself the message.

Why is Robo-advice Increasingly Attractive?

The robo-advice combination of lower fees (for an offer that typically includes rebalancing the portfolio) with engaging interfaces, appeals to people who want technology-enabled, self-directed and affordable investing. Established players should not assume the appeal is exclusively to the novice investor; or that it always culminates in simple choices, based on automated ETF selection. The offer has started to reach a wider range of age groups and levels of investment experience.

From the established brands’ viewpoint, market uptake of robo-advice can be seen either as a passing fad, as a pure threat to be resisted tactically, or as a significant opportunity.