Back in February I attended the Robo-Investing 2017 conference in London. The event gathered industry specialists worldwide from start-ups to established banks to discuss digital wealth and financial innovation, giving great insights into the recent and upcoming trends in the robo-investing field. In this article, I’m presenting you with the key take-aways that caught my attention during the intriguing conference day.
The Difficulty and Expensiveness of Customer Acquisition
Start-up robo advisors have noticed how tough game is to convince individuals to invest their assets via these newly established services, without having the brand equity and customer base that the established players have. This has led start-up robo advisors to think alternative ways of customer acquisition, and quite many have start offering white-labelling services for established banks and asset managers. Robo advisors are of course attracted by the masses of customers reachable through these established players, and for the other counterpart, going with a white-label is an effortless turnkey solution.
Especially good at talking to their clients are the biggest media/tech companies, such as Google, Facebook and Amazon. What is interesting to see is whether these decide to expand into the robo advice field – and who gets a piece of that cake – if it’s a white-labelling robo start-up or will these giants develop their own solutions.
Know Your Customer for real
Whether you’re a start-up or a well-recognised brand, you shouldn’t forget your customers after onboarding: you still need to engage with them. Regardless of the industry you’re in, you need to know how to discuss with your customers: how they are doing, what is going on in their lives, and make them feel that they are cared about. Having that information, you can be relevant for your customers, such as identifying different phases in their lives and having solutions ready for that. This is for you to innovate: How can you identify if your customer is going to buy a house, getting a baby, or wanting to travel around the world? You truly need to Know Your Customer.
The way of communication in the financial industry is changing. Instead of hard, cold numbers, the way to communicate is changing towards feelings and soft values. Financial Service companies are approaching customers with messages that have not been used earlier in the industry. This approach also seeks to awake those who are not interested in investing itself, but other life values – such as sustainable development.
Simplicity and Compliance in conflict
As a robo advisor you might end up in a situation where you need to consider compromises between compliance and the easiness to fill in the onboarding questionnaire. In fact, regulation might make it even more difficult for an individual to invest one’s money, which raised a question whether regulation is actually for protecting companies rather than customers. You truly need to be innovative in finding a balance between simplicity and compliance. A solution might be found in the use of artificial intelligence or gamification. Also, filling in the questions can be turned into an educational journey for the customer, and if the customer is already familiar with investing, the mifidication process would be shorter and quicker.
For a traditional player establishing a robo advisor can be a way to provide and prove consistency in their advisory services, as required by the tightening regulation in financial services. This way you can prove that an individual customer gets a similar offering from both, a human advisor and a digital advisor – in other words, proving that the human advisor is not giving advice based on their own interest. Also, if the offers differ, these differences can be pointed out and justified.
What actually is a Robo Advisor?
The term of robo advice is still notably wide or undefined. It can vary from full discretionary asset management to giving just general, publicly available advice, which might be a bit concerning as companies may not be responsible of that advice. Furthermore, incidents and misunderstandings with these services might harm the general feeling of trustworthiness of robo-advisors. Some of these advice-only robos would like to take it further, but they are missing proper tools for arranging the back office functions effectively – which is exactly what we do here at FA Solutions!
While robo advice might keep its position as the umbrella term for the branch, I believe that different service types under the umbrella will be renamed for easier identification. I’m currently writing a master’s thesis about robo advice, but I rather speak about digital investment management as there are so many things beyond just giving algorithm-based investment advice: Streamlining the entire portfolio management with automated rebalancing, trading, pre-trade and post-trade compliance, settlements, reconciliation, reporting, and so on.