IBS Journal June 2017


33


adviser, clients, especially the mass affluents in Asia and the US, are increasingly keen to make some investment decisions themselves based on digital advice.


On-demand accessibility


Clients are leveraging digital channels to unprecedented levels. Apart from Millennials, Gen Xers and Boomers have also been quick to demand access to digital channels to reach out to their traditional advisors. Some clients in emerging markets are also experimenting by sharing investment ideas online through social media platforms.


Goal-based personalisation


Clients want to receive advice and tailored portfolio recommendations that make sense to them, for their specific life goals. The interactions with advisors are usually around retirement, education, tax planning, wedding planning, etc. The wealth management process doesn’t stop with buying a certain product.


Niche investor segments emerging


Currently, more than $12 trillion in financial and non- financial assets are in the process of being shifted from the investors born in the 1920s and 1930s, to baby boomers born between 1946 and 1964. Over the next 30 to 40 years, an additional $30 trillion in assets will pass from boomers to their heirs in North America alone. At the peak, between 2031 and 2045, 10% of total wealth in the US will be changing hands every five years. According to the European Central Bank, approximately half of all wealth in Europe is currently controlled by people over the age of 55 and will be transferred to their next generation over the next 20-30 years.


The heirs of this massive wealth, the digital natives, will have very different investment behaviours to those of previous generations. Investors’ readiness to adopt digital channels coupled with the emerging Millennials segment across the globe is a strong indicator for the investors’ preference for digital advice. Millennials exhibit very different investment behaviour with 64% of high net worth clients under 40 years old expect to access their accounts via a website and 54% expect to use digital channels such as mobile applications, social


Business-to-business (B2B) advisory. White-label digital platform solution providers for traditional advisers, enabling them to offer their own digital wealth management solutions.


Hybrid advisory. These are traditional advisory services, including personalised conversations and actively managed portfolios blended with computerised portfolio recommendations.


The US has more than 200 D2C robo-advisers. Looking at their fee structure, it is unlikely that many of these firms can achieve profitability without considerable funding, strong partnerships and potential consolidation. The hybrid advisers, especially the ones launched by incumbents, have managed to race away in the quest of AUM acquisition in the US. The new entrants in the B2B segment in the US highlights the entrants’ objectives of achieving scale and generating alternate revenue stream from the proven solution.


Europe is witnessing early stage disruption from D2C and B2B robo- advisers. The B2B platform solution providers are enabling independent financial advisors, financial institutions and asset managers to quickly


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media or video.


Apart from targeted investment advisory for Millennials, there are several other niche segments emerging due to the ever-changing and increasingly specific needs of demographic groups. For example, a former Wall Street executive has raised $10 million in funding to launch Ellevest, a new digital investment platform specifically for women. Miss Kaya, a new Singapore based robo- adviser is promising to “simplify and demystify” money management for women.


New business models emerging for robo-advisers


Three distinct sets of advisory models seem to be emerging in the digital wealth management space thanks to the entry of robo-advisers.


D2C advisory. Direct-to-consumer robo-advisers with limited adviser assistance. These are online platforms that provide automated, algorithm-based portfolio management and without intervention from human advisers.


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