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Inside magazine issue 12 | Part 01 - From a digital perspective What are the next steps for incumbent market players? They must choose their positioning and make their selection within a range of strategic options: •• Ignoring the opportunity at first and focusing on servicing UHNWI and HNWI who require higher added-value services tailored to specific needs, while the robo advisory market matures, taking into account the risk of positioning as a late-comer •• Developing an in-house robo advisory solution to leverage internal expertise, architecture and resources. This should reduce the existing cost base for providing discretionary services to the mass affluent segment Partner •• Acquiring a robo adviser at a fair price; this offers growth potential in relation to the firm’s strategy and digital IT roadmap. It could also enable it to serve a new fringe of customers at lower cost •• Partnering with an existing robo adviser to take advantage of this digital trend and its services in order to capture younger tech-savvy investors who may become the core clientele of tomorrow. Develop Acquire Strategic options for incumbent actors Incumbent actors may take advantage of inevitable market consolidation to integrate robo advisory services into their offerings and technologies. 34
Inside magazine issue 12 | Part 01 - From a digital perspective Conclusion •• Robo advisory solutions are digitalizing and automating client onboarding, investor risk profiling, and investment allocation through algorithm-based assessment , providing online investors with on-demand access to financial advice •• B2C solutions provide online discretionary ETF-based portfolio management at lower cost, including automated rebalancing and tax harvesting. B2B white-labeled platforms offer toolkits to quickly create bespoke D2C digital platforms for automated advice and investment management solutions •• Robo advisory services have been maturing in the United States, where pure B2C robo advisers are facing increased competition from hybrid advisory players within the asset management industry. Development on European markets appears very dependent on local country-specific legislation and many FinTechs are still at seed or validation level •• B2C robo advisers need to validate their business model to secure revenues and become profitable and sustainable, especially as the regulatory burden is expected to further increase, as highlighted by ESMA’s recent discussion paper on automation in financial advisory services. B2B offerings are further expanding and triggering the interest of major actors from the industry, with several buyouts having been completed •• Incumbent actors may take advantage of inevitable market consolidation to integrate robo advisory services into their offerings and technologies. The perceived added value of service offerings is more than ever at stake, and offerings should be reshaped so as to highlight higher value services. Their pricing may evolve from an all-in fee to individual service selection in order to answer personalized needs and demands for transparency •• Finally, big data analytics providers may further disrupt the offering through ad hoc automated advice that answers specific investment needs or questions. Major players from both the finance and big data sectors are funding such B2B solutions designed for global banks and hedge funds that already serve institutional customers in the banking industry and state securities agencies, among others. The players combining their experience in the wealth management industry with new technology solutions supporting automated advice and the omni-channel experience could be the future market leaders if they are able to leverage the data available on the market. Sources This article is based on Deloitte research and analysis of existing FinTech solutions based on available offerings. (1) “2,500% asset growth projected for robo-advice platforms”, based on Cerulli Associates Inc. research, published by Investment News, November 4, 2015. (2) “Total AUM Increases for 11 Leading Robo-Advisors”, Mark Miller, WealthManagement.com, December 22, 2014 (based on a Corporate Insights Survey), and “Robo Advisors Continue Growing AUM Despite Increased Competition”, Ryan W. Neal, WealthManagement.com, August 18, 2015 (based on a Corporate Insights Survey). (3) Deloitte analysis (4) Deloitte analysis (5) “Total AUM Increases for 11 Leading Robo-Advisors”, Mark Miller, WealthManagement.com, December 22, 2014 (based on a Corporate Insights Survey) (6) Deloitte analysis (7) “The growth of firms selling computer-generated financial advice is slowing”, based on company reports, SEC and The Economist research, The Economist, 31 October, 2015 (8) The Economist Intelligence Unit, report Retail Banking, “In Tech We Trust”, 2016 (9) World Economic Forum report “The Future of Financial Services”, June 2015, An Industry Project of the Financial Services Community, prepared in collaboration with Deloitte 35
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Inside magazine issue 12 | Contacts
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