The first decade of robo-advisory was driven by digital — but the future?
ROBO-ADVISORS and digital wealth managers are simply algorithm-based platforms that help clients manage their investment portfolios without the involvement of a human ‘relationship manager’.
When launched in the US market more than a decade ago by companies such as Betterment (2008) and Motif (2010), robo-advisory services were groundbreaking and allowed for retail clients to get more personalized investment advice.
Slowly, given the track-record of the platforms and the transparency and low fees/commissions charged, robo-advisory services began attracting high- and ultra-high net worth (HNW and UHNW) investors as well.
When similar services made a debut in Asia a few years later, robo-advisors and digital wealth managers started becoming more mainstream.
Given their popularity with investors in Asia, banks began exploring the opportunity too, hoping to create a hybrid model where employees in the branch network could leverage in-house robo-advisory platforms to delight retail customers with tailored investment advice.
Truth be told, that hybrid model has found a lot of success in the region and in other parts of the world — but independent platforms such as Smartly, StashAway, and Syfe are quickly winning customer’s hearts in Asia, and a share of their wallet too.
Tech Wire Asia recently caught up with Syfe CEO Dhruv Arora to talk about the future of robo-advisory and wealth management.
Arora believes that one of the biggest advantages that digital wealth managers offer retail investors is a reduced barrier to entry into financial markets.
“We do this by cutting down the minimum investment amount, as opposed to traditional wealth managers and banks, which usually require a hefty portfolio.
“This opens up new doors for average individuals to access sophisticated financial and wealth planning services regardless of how much they are able to invest.”
However, in the future, Arora anticipates a shift (in the industry) towards slashing the cost of investing itself.
At the moment, for example, investors looking to buy unit trusts or investment-linked policies in Singapore’s financial markets typically end up paying two to five percent just in sales charges and exit fees.
“But changes are underway in the industry, and we will eventually move towards a future of near-zero trading commissions and brokerages, which will put power back in the hands of the consumers.”
The move is consistent across banks, trading houses, and traditional and digital wealth management platforms — so players will need to find a way to differentiate themselves in the years to come.
Syfe and some of its peers believe that the right way to delight customers in the future will be to provide an even better experience by putting the human relationship manager front and center.
“Although automation will pave the way forward, the interesting trend of robo-advisors are moving towards blending their technology with a human touch.”
At Syfe, for example, Arora has recently put together a financial advisory team, allowing consumers to consult with highly experienced wealth managers to assist with planning their financial roadmaps and address any concerns they may have.
“This plays a key role in building initial trust with consumers, and helps to accelerate the transition to digital investment platforms.”
Like Syfe, other robo-advisory and digital wealth management platforms are working on building high-touch human-centered services that delight customers and provide them with the right advice. That’s the mantra for success over the next decade.