Robo investing began life as a relatively simple concept; an automated investment solution that took into account client’s personal circumstances and delivered suitable and appropriate personalised guidance to help them achieve their life’s financial goals.
Initially, it was squarely aimed at the B2C market. But paradoxically for such an intrinsically people-orientated sector, its use within wealth management has grown as a means to add value to customers as well as to harness broader digitisation efforts.
Uday Nimmakayala founder and CEO at WealthObjects, explains: “Robo advice started off as being just automated investment allocation initially for a single goal - then moved on to a multi-goal approach to planning and investing at a point in time - then to tax optimisation - then finally to continuous and proactive planning across all financial segments of life right from investments to term savings products to insurance products. A robo can completely transform the way one thinks about savings, investments and protection.”
Indeed both the cost of the service provision as well as its quality are important elements to wealth managers. They want to be able to service customers in a cost-effective way but also retain them with a good service proposition that is appropriate to their wealth level. The hybrid model, with the advisor offering a high touch personal service backed up with a quality digital proposition is one way to achieve that within a higher wealth bracket.
Offering a greater degree of self-service further down the scale also works. It is not just a cost play it is also a client retention issue.
John McCann. CRO at Nucoro comments: “One way of doing this before you get to high net worth level is an advisory model with a series of model portfolios accesses through a simple onboarding process. In this model the end customer is still very much in touch with the advisor but you get efficiency gains in terms of the service and the investment process.”
Advisor to platform
Having the technology that is flexible enough to allow for varying degrees of self-servicing is thus key to meeting the needs of all clients.
Kate Tsoura, CMO at Profile Software comments: “The technology itself needs to be flexible enough to allow the wealth manager to customise and adjust the functionality that is available to various customer groups. Wealth managers want to automate the processes that are time consuming and repetitive and focus instead on developing relationships. AI is an important facet within this: “Artificial intelligence is also key to this because it vastly improves the decisioning. That is a very visible advantage that clients can see.”
Indeed, according to Deloitte’s report, ‘The future of asset serving | Shaped by three disruptive technologies’, AI-powered value-added services are already on the way to becoming mainstream practice in an industry seeking to build new value chains. “Delivering best-in-class personalised financial and investment advice at scale would be economically impossible using human advisors but can be achieved by AI,” it says.
Implementation
The fact that most robos are built to be a SaaS-based in the cloud also plays well into the digitisation and open integration efforts that most wealth managers are now undertaking. It can neatly solve an architecture modernisation issue by orchestrating multi-channel financial services to retail, affluent and wealth clients as well as providing seamless and cost-efficient integration of providers, core banking systems and custodians.
Nimmakayala explains: “Obviously really knowing what a wealth manager has in terms of in-house capabilities, resources and where they want to go is a good starting point. We help with new business models and work with clients who have no tech teams and also ones who have very large tech teams - this is more about whether what the firm wants can be delivered in house or should they pick the right firm who are specialists in launching such business models and whose technologies have been built in the last few years.”
This remotely hosted, cloud-based approach has become much more culturally acceptable in the past few years with the advent of Azure and Amazon platforms and greater understanding of how they work as well as the security, maintenance and upgrade aspects.
Generally, the idea that that the robo can be agnostic to integrate into the wealth manager’s own systems and provide full integration, AI adaptation as well as customisable workflows and regulations so as to be adaptable in the future.
Modular offering
McCann comments: “Having a modular service means that wealth managers can choose which aspects they want to have and build on what they already have. Initially many want quick wins with things onboarding, KYC, AML and then move to middle and back office. This model integrates within the in-house platforms and so there are no concerns over security or loss of control and as confidence builds then so the scope can be built out too.”
In this sense the robo can become a platform and tune into other products, services and functions. Many of these were very paper-based or very clunky and just not geared towards the open integrations economy we now see within financial services.
Thomas Schornstein, Head Europe & Middle East at additiv adds that extending the robo’s remit out to other functions, such as the middle and back office plays heavily on the overall need to digitise. “The greater digitisation play means that even services that are not client-facing still need to be up to scratch in order for those that are client-facing to be the best that they can be,” he says.
McCann agrees: “The win is that wealth managers now don’t have to build in house and can start small and then make incremental changes rather than a huge digital transformation project which is far more mentally manageable.”
However, this is not an overnight change and even with C-level enthusiasm there is work to be done between providers and in-hose tech teams for this to become normalised.
Tsoura comments: “When the first mobile apps were launched in 2013 banks were curious but take-up was not immediate. They are now considered to be an essential part of the offering. The same will happen with robo advice itself as well as the suite of functions and processes that surrounds that. Areas that allow for personalisation and customisable technology will come to be as popular as those which are easily automated now.”
