The Rise of the Robo-Advisor

Transcription

1 The Rise of the Robo-Advisor A threat or an opportunity to the financial advice industry? Eugene van Rensburg Head: Wealth Management SA 21 June 2016 iress.com

2 Financial Services Industry Trends Financial Services Provider Profitability Pressures & focus on Wealth Management revenue by Banks Upselling & Crossselling coupled with efficiency gains in large financial services businesses Multi-channel capabilities a reality & demanded by customers Convergence of Financial and Wealth Markets Increased Regulation & Convergence between Traditional Capital Markets & Wealth Markets Policy Global emergence of Self-directed investing as personal financial management channel Business Solutions putting more control in the hands of the broker & advisor Better Informed & demanding Clients from Retail & Massaffluent to HNW & UHNW. iress.com 2

3 Robo-Advice & the digital channel opportunity A Robo-Advisor is an online wealth management service that provides automated, algorithm based portfolio management advice without the use of a human financial planner. 41% 85% 6bn Mobile phones Across the world, exceeding the number of people in the world Online advice Consumers seek financial advice online Banking transactions Online 70% Expect customer facing staff to have a single view of them in real time iress.com 3

4 Robo-Advice & the digital channel opportunity $120trillion Global Savings Managed by global wealth managers Global Revenue Opportunity $175bn - $200bn 4x Clients expect PERFORMANCE TRANSPARRENCY ENGAGEMENT TRUST 3x More likely to feel confident that they can achieve their life goals if they have a written plan in place, compared to no plan. 73% Wealth clients have multiple wealth management relationships 40% Consumers open to switching wealth managers for superior client experience 57% Wealth clients open to consolidation of relationships 69% Consumers Seek financial advice from sources other than a financial adviser. 173% the More in retirement savings of the advised to non advised. iress.com 4

5 Global status of Robo-advice United States is used as a barometer of success of Robo-Advisors in attracting Assets under Mngt US Securities and Exchange Commission reported in January 2016: AUM for Robo-Advisors grew by 209% year on year from Jan 2015 to Jan 2016 totaling $11,743bn Whilst these are material nominal AUM, it represents less than 0.25% of the Private Financial Wealth in North America. iress.com 5

6 Robo-advice in South Africa Mixed views: Replacing advisers across a large number of financial services offered An opportunity for advisers to better engage with clients and to make their businesses more efficient Robo-Advisors are expected to: Encourage new entrants to wealth management Drive down costs of investing funds Unlock new client segments Attract younger, technically proficient clients Encourage self help, anytime, anywhere Enable client service in underserviced markets iress.com 6

7 Investment into Wealth Management The Boston Consulting Group Survey 2015, examined the total investment allocation by wealth management institutions and focused on the following two specific categories: Investment to enhance existing business, and Expanding into new frontiers Priorities identified were: 1. Improve sales force effectiveness 2. Enhance digital interfaces 3. Develop a digital advisor channel 4. Develop new client segments The overall emergent investment theme seeks to enhance the overall customer experience and improve business efficiency whilst enhancing and supporting human sales channels. iress.com 7

8 Robo-advice business model Business Model Robo-Advisor should compliment existing distribution strategies Appeals to a broad range of clients & potential clients through effective segmentation Making money Attracting funds under management Technology driven so low cost service model Ease of use & value - attracts clients back, & easy referrals Typically low value accounts scale & volume required Independence Product Providers will be quick to offer Robo solutions, in order to grow AUM, obviously this route will imply a loss of independence for advisers tied to the platform Advisers can retain independence by setting up their own Robo solution iress.com 8

9 Multiple Stakeholder Perspectives Business Regulation iress.com 9

10 Regulatory Environment Context Client Expectation Regulatory Responsibility Organisational Authority Business Mandate iress.com 10

11 Business Environment Context iress.com 11

12 Lifestyle & Entertainment Communication Primary Banking Risk Products Insurance Products Medical Care Food & Housing Education Social Burden Saving & Investment Client Personal Finance Context My Wallet iress.com 12

13 Multi-Channel Financial Services Full Service Self Service Holistic Full Service Face2Face Scaled Advised Limited Face2Face Advice Guided Scaled Automated Call Centre Direct to Client Automated Advice Online Trading Self Directed Internet banking PFM iress.com 13

14 Technology Facilitated Process Multi-Channel Multi-Platform Multi-level Compliance Tightly Coupled & Interconnected Enabler Single Client Data Store Advice Congruence Unified Regulatory Compliance Data Workflow Calculation Consistency Usability Mobility Security Product Vendor Product Vendor External Data Fulfilment & Systems Data Integration Integration Execution Integration iress.com 14

15 Omni-Channel Financial Services Full Service Self Service Holistic Full Service Face2Face Scaled Advised Limited Face2Face Advice Guided Scaled Automated Call Centre Direct to Client Automated Advice Online Trading Self Directed Internet banking PFM Financial Advice Platform Workbench configured specific to advice channel. Financial Institution Client Platform Financial Advice Platform Architecture Single Client Data Store Advice Congruence Unified Regulatory Compliance Data Workflow Calculation Consistency Usability Mobility Security Financial Institution Backend systems iress.com 15

16 Robo-advisor friend Robo-Advice should not be viewed as an adversary or alternative to traditional advice models, but rather an opportunity for advisors to grow and scale their business as part of a multi-advice, multi-channel proposition iress.com 16

17 Thank you IRESS South Africa Building Two 2929 on Nicol 2929 William Nicol Drive Bryanston 2021 T +27 (0) enquiries@iress.co.za Offices in: Australia, Canada, Hong Kong, New Zealand, Singapore, South Africa, United Kingdom. iress.com