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leverage technology for improved customer experience.
With Asia’s high internet penetration rates, its large Millennial population and the changing consumer behaviour moving towards greater digitalisation, Asia is likely to have a tremendous opportunity in financial advisory services with the growth of robo-advisers. We believe that robo-advice will complement, rather than displace, financial advisors. Hybrid robo-advisory will emerge as a key segment with some large firms building their own offerings, and some buying independent robo- advisory firms. The white-labelled robo-advisers will be the ideal add-on to capitalise on the hybrid trend for smaller firms.
Emerging need for comparison platforms
As discussed in great detail in our report, there are tremendous inefficiencies in the retail brokerage market across regions. US brokers are far cheaper than other regions. Owing to the differences in product offerings, trading costs, platform capabilities etc. in the retail brokerage market across regions, investors are more willing to look beyond their own countries’ service providers. This creates an opportunity for online brokers to acquire international investors. In fact, several online brokers have launched their own robo-advisory offerings as an additional service for the retail investors. TD Ameritrade, which manages assets of over US$28 billion, has launched a new platform called Essential Portfolios.
Motif Investing is an online broker that is changing the face of online investing through an innovative, transparent social platform. They have launched a service that enables investors to perform theme- based investments. Motif has also launched a subscription based platform, Motif Blue, with annual subscription fees and thus removing the transaction costs for heavy traders.
Europe is witnessing similar trends with Saxo Bank launching a full-scale digital investment platform for retail investors in partnership with BlackRock. The automated ETF portfolio expanded to Denmark, Finland, Italy, Norway, Netherlands and Sweden in 2016. They continue to expand geographically. E*trade, one of the biggest online brokers with over 3.5 million brokerage accounts, has launched its own robo-adviser, Adaptive Portfolio. Discount brokers such as Zulutrade and eToro are offering
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social investment features to investors to leverage wisdom of crowd.
In addition to the launch of robo-advisers, some retail brokerage firms are also opening up APIs for third-parties which may lead to a a new collaborative ecosystem among incumbents and FinTechs to improve the trading experience of investors.
Big market, multiple models, uncertain outcomes
The key to the future of robo-advisory, as with all spaces within FinTech, will be the degree of personalisation offered for education (and generating interest in investing) as well as investment management (based on life goals and interests). Thus niche segments will emerge and technology will act as the super layer eliminating the border between desire and advice.
There will be more choices. Choices on products, the level of interaction, the level of automation, the channel of service, etc. There will be platforms that will make the choosing process easier. Chatbots, who are seeing tremendous early stage capital today, will develop significant vocabulary within the space. New markets will emerge in developing countries with their increasing middle class population and interest in investing from rural population through mobile devices.
Thus the interplay of human advisers and machines will reshape the adviser-investor relationship. Human advisers will not disappear; but they will likely turn out to be the high-end, value-added service in digital wealth management. The opportunities available for retail customers, corporate customers, brokers and service providers are evolving on a continuous basis; this is definitely a space to keep a close eye on!
About the author
Devie Mohan is a FinTech industry adviser and analyst based in London. She is a panel member on the ING Group Think Forward initiative on better financial decision making. She writes extensively on innovation, disruption and digitalisation and is a columnist with several publications. She is actively involved in the FinTech community and has been listed in the top 10 of City A.M. newspaper’s FinTech Powerlist and in Innotribe’s FinTech Power Women list.
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