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The B2B robo advisor market: enabling wealth managers to play

By Alison Ebbage, Contributor, The Wealth Mosaic

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by The Wealth Mosaic
| 31/10/2018 12:00:00

The rise of the robo advisor market has been well documented over recent times. Initially, this came to market as a B2C proposition and perhaps picked up pace in the wake of moves such as the Retail Distribution Review in the United Kingdom which made it uneconomical for advisors to service investors lower down the value chain. Alongside such reforms, the technology also allowed for investors to self serve and pay a lower fee than charged by advisors.

But, within the wealth management sector, the element of the personal relationship remains key and a hybrid robo advisor model has emerged. Here the idea is to use a robo advice proposition to grow and protect AUM and future revenue as well retain clients through an enhanced service offering rather than replace the human touch - as is the case further down the value chain.

No surprise then that solution providers within this space are now offering a hybrid, B2B model and accordingly the market has grown with providers eager to throw their hats into the ring. Let’s look a little deeper at some of the firms in the B2B space.

London-headquartered WealthObjects is fairly typical in that it considers itself to be a pure tech B2B play. Others that think that the B2B hybrid play is the best for the wealth management market include Zurich-based additiv, Singapore-based Bambu – although it also has a B2C mass market model as well – and US-headquartered Invessence, which initially launched as with a B2C offer in 2013 but has since changed to a B2B model due to the importance of the relationship manager within this sector.

The needs – service and customisation
For wealth managers themselves, meanwhile, they are looking for robos to help them deliver superior service. There can be a degree of self-service however this must always be in conjunction with the relationship manager and all revenues still need to land with the wealth manager rather than the robo direct. Bambu mirrors the industry by charging a fee for the user not for the assets under management and others stress the need for the robo to be lower cost for the relationship manager to be incentivised to use it.

The key is to complement the wealth manager so for example the robo could deal with a specialist asset class within a discretionary portfolio or provide high class algorithms to assess risk within an advisory portfolio.

Customisation also comes high on the list. However, here there is an interesting geographical difference with demand in Europe and Asia for customisation being high whereas in the US, the preference is for a turnkey solution that is easy to white label and plug into the wealth manager’s own front to back platform.

WealthObjects and Invessence in particular hold customisation close to their hearts. Both offer a fully personalised approach where they work in partnership with the wealth manager to match the robo to the particular business model. WealthObjects also offers the opportunity to slot the robos into the wealth manager’s own technology platform and thus provide a straight through element.

The means - technology and APIs
Technologies such as APIs and AI are also playing well into the wealth management robo advisor space. Extending the remit of the robo advisor is afforded by their technological prowess. At the very least, using AI and machine learning to enhance the core offering of the robo by being able to factor in a lot more understanding of the individual is possible. This could use machine learning to take into account a customer’s complete financial assets, dynamically adjusting in real-time based on ever changing financial health and therefore creating a true financial life journey.

Invessence has already partnered with IBM Watson to provide personality insights to place a person in 1 of 5 categories and from there to assess a risk profile. WealthObjects meanwhile has worked towards helping the advisor to be more efficient in terms of prompts and next steps actions. Bambu meanwhile has developed an external programme with Stirling University in the UK, to exploring how it can use AI to understand financial journeys at an individual level using its ‘People Like Me’ tool. It is also looking at how to better optimise various goals to portfolio creation, again at a very individual level.

additiv seems keen to see whether AI and machine learning could help with onboarding; providing customisation that is obviously needed while also working to make the process less irksome and more seamless.

With APIs, the reach of the robo can now span multiple geographies and meet the distinct needs of each, albeit requiring careful management and a good knowledge of each of those geographies. APIs also allow for limitless links into fund and asset managers as well as ancillary services such as custodians.

The possibilities are endless and the direction of travel could well be that the robo ends up behaving as platform for external providers wishing to feed into a wealth manager’s core banking system. This could be especially useful within a middle office environment where speed and accuracy are key and are highly dependent on multiple data inputs. Operational efficiency is, after all, always a plus!

Some concluding thoughts
Ultimately, robos are very well placed within the wealth management sector in that they are essentially FinTechs with the ability and experience to provide something that the wealth managers themselves often cannot. Indeed, a confluence of many factors including adoption of mobile, speed of delivery, advent of great UX/UI experiences that have become central in consumers lifestyles and although wealth managers are devoting more budget to their tech they cannot, in most cases, devote the time or resources into building something in-house that could compete with a specialist FinTech offering (though many still claim they can!).

This environment bodes well for partnerships with robos within the wealth management sector especially those prepared to go the extra mile in term of customisation and adding value by extending the remit of the robo into other areas.

Business and solution profiles of the firms featured in this article are available on our directory-based platform via the below links:

additivhttps://www.thewealthmosaic.com/vendors/vendor/additiv/
Bambuhttps://www.thewealthmosaic.com/vendors/vendor/bambu/
Invessencehttps://www.thewealthmosaic.com/vendors/vendor/invessence/
WealthObjectshttps://www.thewealthmosaic.com/vendors/vendor/wealthobjects/

While our Digital Investing business need category, which features 82 solution profiles including from those firms above, is available here: https://www.thewealthmosaic.com/needs/digital-investing/