OK, so robo advice 1.0 wasn’t the great disrupter it set out to be. People just didn’t move in sufficient numbers to the digital only players to make business viable for many. Instead of replacing the incumbents, robo players shut up shop and the headlines moved from euphoric optimism to doom and gloom in short order.
Perhaps the doomsayers were a little over zealous? Yes there have been casualties in this nascent sector but let’s not forget that Amazon and Tesla, now the world’s 3rd and 4th biggest companies by market capitalization, took 9 and 18 years respectively to enjoy profit.
The birth of hybrid
Cue robo advice 2.0 where the merits of digital and human intervention came together, bridging the trust gap and improving conversion ratios and investment size. The digital wealth players refer to that as the hybrid model: digital first with humans to boost engagement. However, most in the wealth industry would define ’hybrid’ the other way around: human adviser first, using technology to streamline the process and drive efficiency.
So what might robo advice 3.0 look like?
Hopefully there will be a tailwind for the sector from the FCA who have set out in their Consumer Investments: Strategy and Feedback Statement, a 20% reduction in the number of consumers with higher risk tolerance holding over £10k in cash by 2025.
A raft of new features and benefits will appear, no doubt based on the wizardry of machine-learning and artificial intelligence. Think about the pace of computing power capabilities and how that can be harnessed to wealth management…
Flick of the switch
Bringing together the best of digital with the best of human-led advice is the panacea. To date, the services have been seen as distinct but increasingly can be merged as part of an advice firm’s overall proposition.
Let’s not forget Amazon and Tesla, now the world’s 3rd and 4th biggest companies by market capitalization, took 9 and 18 years respectively to enjoy profit
Ultimately, a solution that truly integrates digital and human-led advice, allowing advisers to deploy a service that seamlessly moves from digital advice to human advice at a “flick-of-the-switch” will become possible.
The key to this solution is the consolidation of assets on an existing adviser platform. This will eliminate all complexity that alternative solutions involve and offer a seamless customer and adviser experience when flicking-the-switch to move from a digital-led service model to a human-led service model.
Back of the net!
To use a footballing analogy, consider an established advice firm as being Manchester United (premiership titan but with ever growing ambition) while a fintech like Moneyfarm could be Dulwich Hamlets (one of London’s ‘coolest’ non-league clubs who are anti-establishment and doing things differently.)
Man United might loan out players to Dulwich (pushing it?!) to develop the young talent and take them back when they’re ready to add value to their team.
Similarly, the advice firm could ‘loan out’ smaller clients to Moneyfarm who will incubate that relationship, ready for a return to the top flight (full advice) when the time is right.
Dan Giddings is head of business development UK at Moneyfarm
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