Robo-advice originally referred to D2C platforms for automated wealth management but has since become a catch-all term for digitisation in wealth, across both incumbents and new entrants, subsuming a variety of ‘hybrid’ distribution models.
Listed below are the top robo-advice predictions, as identified by GlobalData.
The market for D2C robo-advice is already crowded and ripe for acquisition/consolidation with many players pivoting to B2B. The tech and consumer mega trends are much bigger than any one startup and are unstoppable. The question is how exactly they’ll play out in 2020.
We expect big investment banks and asset managers to continue with a ‘future funnel’ approach by launching online savings banks and mass-market robo-advisors. Goldman Sachs has led this approach but JP Morgan and others will also expand ‘down.’
Retail banks will continue to move ‘up’ with integrated investment management propositions to mobilise the €20tn–25tn ($22.3tn–27.8tn) dormant in savings accounts into investment. The underlying technologies and customer segments PFM and robo-advice will increasingly overlap, leading providers to source technology in a more joined-up way across retail, SME, and wealth. This will help deliver a more integrated experience. These platforms will continue to revise downward fees and minimal investible assets.
Banks will source tech through partnerships to access a proven platform that can open up a new revenue stream and attract younger clients without impacting the current operating model. But rather than B2B2B, increasingly B2B will prevail. This will enable tighter integration at the order routing level, more flexibility to incorporate new products into the algorithm, and a solution that can fit bank legacy.
Even more conservative wealth managers will begin to incorporate pieces of robo technology. Not just for execution, monitoring, and tax loss harvesting, but for things like onboarding, which can be done more quickly and securely through robos while putting the whole GDPR compliance process on guardrails and feeding that insight into strategic CRM.
However, the real blurring of digital and human will come not from digitising processes but digitising people to get closer to clients. This could be through guided advisor conversations, as vendor Bambu has set up with Bank Central Asia in Indonesia, automating cross-selling and upselling opportunities through an enterprise tablet app. Or it could be through analytics to flag clients primed for certain life event conversations or market volatility, as Responsive in Canada does.
As with digital banking, the scale imperatives of digital businesses will see new digital banks, tech firms, and retailers diversify into wealth sub-segments while robo-advisors will continue to expand down into retail products, with Betterment and Acorns already offering deposit accounts.
This is an edited extract from the Banking & Payments Predictions 2020 – Thematic Research report produced by GlobalData Thematic Research.