The automated investment management space is hence becoming ever-more competitive as new entrants launch propositions. Supported by software developers, traditional wealth managers have also started exploring the digital advice market. Competition will thus increase further, although robo-advisors are still looking for business models that will appeal to HNW individuals.
- Regulators have not been able to keep up with the growing popularity of automated advice solutions. This creates an opportunity for industry leaders to have a direct impact on how the regulatory environment around robo-advice is designed.
- The US is the home market of low-cost robo-advice, as self-directed investors are driven by price sensitivity above all else.
- New entrants across the globe are introducing innovations to the automated advice space.
- Most wealth managers focused on the HNW segment do not consider robo-advisors a threat to their business, as the wealthiest individuals show limited interest in robo-advice.
- Robo-advisors that emerged as startup companies will partner with incumbents to attract more assets to their platforms.
"Robo-Advice: Mapping the Competitive Landscape" looks at the growing robo-advice market. As the industry lacks clear definition of what robo-advice is, we clarify the differences between various automated investment platforms. Case studies of the most successful and established robo-advisors provide insight on what features appeal to clients and why. Drawing on the 2015 Global Wealth Managers Survey the report specifically analyzes HNW investors’ attitudes toward automated advice. Established software vendors’ activity in the robo-advice space is also covered.
Specifically the report:
- Defines robo-advice, providing an overview of its history so far and regulators’ approach to services provided by automated advice platforms.
- Provides case studies of successful robo-advisors operating in a number of markets, including the US, the UK, Switzerland, and Australia.
- Identifies the digital platform features that appeal to HNW investors.
- Analyzes wealth managers’ attitudes towards robo-advice.
- Looks at the benefits of partnerships between robo-advisors and competitors operating traditional business models.
Reasons To Buy
- Understand what robo-advice is and how it affects traditional wealth managers.
- Recognize regulators’ approach to robo-advice and the guidelines to consider when launching digital investment platforms.
- Learn best practice from established automated advice providers’ case studies.
- Discover how automation can be beneficial to your company’s operations, particularly in relation to advisor efficiency.
- Identify the markets with the highest growth potential in the automated investment space.
- The robo-advice market will grow as traditional players launch digital platforms
- Key findings
- Critical success factors
2. Defining Robo-Advice
- Robo-advisors are digital investment management platforms
- The first client-facing robo-advisors were founded in 2008
- Robo-advisors were preceded by PFM tools
- Automated advice platforms are often fintech startup companies
- B2C robo-advisors have been evolving, with traditional players building their platforms
- Robo-advice has also entered the B2B space
- Financial advisors can use existing solutions initially designed for the B2C market
- Robo-advice platforms are now offered by IT software developers
- Regulators are increasing the scrutiny on automated advice
- Regulators' attitudes towards robo-advice differ between markets
- The industry should use the robo-advice label carefully
3. Client-Facing Robo-Advisors Competitive Landscape
- The US is the home of robo-advice
- US robo-advisors operate three typical business models
- The vanilla US robo-advisors appeal to cost-sensitive investors looking for simplicity
- Hybrid business models leverage the digital channel to offer advice provided by humans
- Robo-advisors have to introduce unique features to succeed in the long term
- UK robo-advisors have been lacking recognition
- The uptake of digital platforms in the UK differs from the US
- Few digital players have obtained advisory permissions
- Major UK competitors offer non-advised digital discretionary asset management
- Business models in other markets mostly follow US and UK competitors
- Theme-based investing can engage clients more
- More advanced portfolio management strategies could attract sophisticated investors
- Few robo-advisors operate in more than one market
- Universal financial services providers have the resources to launch innovative platforms
- Wealth managers are not concerned by robo-advisor competition
- HNW individuals in developed markets show little interest in robo-advice
- Robo-advisors are not sophisticated enough to compete with traditional wealth managers
- Human relationships remain vital for HNW investors
4. Automated Investment Tools For Human Advisors
- Relationship managers can be more efficient when backed by technology
- Retail robo-advisors should be interested in partnerships with human advisors
- Betterment Institutional partnered with Fidelity
- Hedgeable and Scalable Capital offer investment management for institutions
- RBC's advisors will be using FutureAdvisor's capabilities
- Jemstep started as a client-facing platform but shifted to work with advisors
- Automated advice platforms are becoming a standard product offered by banking software developers
- Envestnet built the Advisor Now portal
- Additiv offers software incorporating automation at four different levels
- Abbreviations and acronyms
- Liquid assets
- Mass affluent
- Mass market
- Competitor factsheets
- 2015 Global Retail Banking Insight Survey
- 2015 Global Wealth Managers Survey
- Exchange rates
- Further reading
List of Tables
Table 1: Competitor factsheet: Betterment
Table 2: Competitor factsheet: Wealthfront
Table 3: Competitor factsheet: Schwab Intelligent Portfolios
Table 4: Competitor factsheet: FutureAdvisor
Table 5: Competitor factsheet: Personal Capital
Table 6: Competitor factsheet: Vanguard Personal Advisor Services
Table 7: Competitor factsheet: Hedgeable
Table 8: Competitor factsheet: Money on Toast
Table 9: Competitor factsheet: Wealth Horizon
Table 10: Competitor factsheet: Nutmeg
Table 11: Competitor factsheet: HL Portfolio+
Table 12: Selected digital investment platforms outside the UK and the US
Table 13: Competitor factsheet: Stockspot
Table 14: Competitor factsheet: True Wealth
Table 15: Selected established financial services firms' activity in the robo-advice space
Table 16: US dollar exchange rates, December 31, 2014 and December 31, 2015
List of Figures
Figure 1: Selected US robo-advisors by business model
Figure 2: US self-directed investors want to save on fees and invest easily
Figure 3: The UK self-directed market is not fee-driven
Figure 4: Selected competitors in the UK digital wealth management space
Figure 5: HNW clients' level of interest in robo-advice is moderate
Figure 6: Robo-advisors are too simple to compete with traditional wealth managers
Figure 7: German wealth managers consider robo-advisors a threat to their business
Figure 8: Contact with human advisors is vital for HNW clients
Figure 9: US robo-advisors' low fees attract HNW clients' attention
Figure 10: Automated investment tools can increase wealth managers' efficiency
Figure 11: Betterment Institutional offers an easily integrated investment and client management solution
Figure 12: Additiv's digital private banking platform is a solution for HNW clients
- Aberdeen Asset Management
- Asset Builder
- BNY Mellon
- Bank of America
- Bank of Montreal
- Brewin Dolphin
- CPB Software
- CPN Investment Management
- Charles Schwab
- Deutsche Bank
- Fiver a Day
- HSBC Private Bank
- Hargreaves Lansdown
- Huygens Capital
- Ignition Direct
- Macquarie Bank
- Money on Toast
- Morgan Stanley
- National Australia Bank
- Personal Capital
- Royal Bank of Scotland
- Saxo Bank
- Scalable Capital
- TD Ameritrade
- True Wealth
- Union Investment
- Wealth Horizon
- Wells Fargo