Robo Survivors and the Quest for Clients
ROBO-ADVISORS and their hybrid models will fundamentally change the wealth management and advice industry.
Many of the early business models which aimed to build their market from the ground up, hoping that millennials in their droves would suddenly seek a digital advice experience, are simply not sustainable. Highly leveraged and with hungry investors eager for returns, they are struggling to reach critical mass of clients and assets – and profitability – fast enough.
It seems more than likely now that most of the first generation robo-advisors will be assimilated into larger hybrids, where the focus is on providing wealthier clients with a cost-efficient digital bolt-on service. Hence there’s a shift towards more of a client relations proposition than a digital financial advice offering.
So what happened to financial advice for the masses?
Investment cyborgs for the masses
The market is conflicted. Some financial institutions are developing in-house [human] advisor teams, with tied or independent advice propositions. Others are exploring truly digital, or cyborg, advice propositions with no human interface at all, except for basic technical support.
For the latter you need scale (access to large numbers of potential investors) and deep marketing pockets. Or do you?
Client acquisition requires integrated thinking and a team of marketing and communications specialists working together to create an experience for investors which helps them make decisions for themselves.
The cyborg handles the risk assessment process and ensures the client invests successfully within his or her risk tolerance. However, without a program of ongoing financial and investment education, how will the investor grow their wealth and attract a more personal wealth management service? A post wealth accumulation client is a profitable client to a wealth manager.
Connect with a client
Whether it’s a wealth manager looking to nurture wealthy clients of the future, a retail bank looking to increase customer loyalty with a compliance-friendly digital service, or an investment house trying to reconnect with a disintermediated investor base, each business must position the individual investor at the center of their experience matrix.
The word "individual" is vital, because that is how we build a relationship based on trust between a client and a business; knowing a client’s preferences, understanding their circumstances, and predicting (or suggesting) their next decision.
In the world of cyborg advice, there is no appetite for guess work. Without human interaction it’s even more important that portfolio construction is as accurate and personal as possible. Although they are small investors, clients will demand successful, cost-efficient investment portfolios, which means the roles of client relations, marketing and communications must work in harmony to manage and educate clients during wealth accumulation and through to retirement planning.
Education of clients can be the most cost-effective part of your customer acquisition and retention program, and should lead the marketing efforts.
Be creative, be smart
For the smart business, the financial advice gap is an opportunity. According to a Capital Employee Benefits survey of 3,000 investors, since the implementation of the Retail Distribution Review financial advisors don’t form part of an investor’s decision-making process.
Most investors do not make decisions without first checking Google, or sharing and discussing ideas with friends and family, or checking out the personal finance and investment media.
eValue is a UK company that provides investment consultancy financial technology solutions to financial institutions. It also builds and monitors cyborg services. Its 2016 research of more than 22,000 individuals using the Pensions Freedom Planner shows that older generations have an increasing appetite for risk to fund their retirements whilst younger generations are proving to be the most risk averse investors.
Something’s not quite right with this picture. There is a big role to play for the industry to teach consumers how to invest again.
“This caution may be the result of the turbulent economic times that Generation Y has lived through compared with the relatively benign markets of the past when high risk strategies were not needed to achieve good longterm investment returns,” said Bruce Moss, Co-Founder, eValue Investment Solutions.
Solving this ‘risk inversion’ is the responsibility of each and every market participant. Similar patterns for investors are emerging in other countries too.
For marketers, it is an opportunity to integrate highly intuitive digital investment solutions with personalized marketing experiences which support and drive client relations, client communications and education needs of financial advisory firms and wealth managers.
Despite the challenges ahead for this accelerating part of financial services, the future is brightest for investment technology and its benefits to investors of all types and wealth.
As marketing and communications professionals, we should be excited to help the industry to bridge the gap between investors who want to retire comfortably and the businesses who can help them get there.