3 strategies to transit from (hybrid) robo to automated advice

In the last years over 20 Robo Advisors entered the European Market. Most of them, with purely digital advice based on investment algorithms. End of 2017, we observed two major new trends:

1. On the one hand, recently, digital providers like Prospery, Liquid, and Wealthfront added human advice to their offering.
2. On the other hand, the first established private banks started their own digital-only services.

This begs the question: How will Digital Wealth Management look like in the segment of Private Banking?

Here are three strategies we might see in 2018:

A new Segment, a new Channel: Reaching out to “Mass Affluent”.
”In the last years, private banks raised the bar for their exclusive services. Today, in order to obtain investment advice from a private bank you usually need more than 1 million € investable capital. Especially regulatory requirements such as

MiFiD II drove the internal cost quota of the advice processes to new heights. So, how can private banks serve clients with “smaller investment tickets”?In order to “test digital”, some private banks have grown into market segments they did not target in the past. They started new services under new brands. Those offer a digital “light version” of their investment advice – similar to the Robo Advice in the Retail Banking World.

The best of both worlds: Hybrid (Robo) Advice

In the past, investment advisors often faced the challenge of limited insight into the client’s portfolio. To address this issue, private banks have started using aggregating technologies like Fincite Core which provides detailed insight into the wealth of a client. With these technologies, clients can easily connect financials via the internet:

• Aggregate bank accounts and wealth positions (such as Real Estate, Gold, etc.)
• View asset performance and risk
• Receive targeted news and research matching current wealth positions

Based upon this, the client can be either served online or invited into an offline advice (see more at 360° Wealth). Leveraging this information, private bank advisors can better acquire or maintain relationships with their clients by knowing which clients to address, when and how to do it – based on near-real-time client data.

Improving from within: Automated Individual Advice

Banks started using automation to support the value chain from the Investment Office all the way to the Portfolio Management and Relationship Manager. Through the use of automated advice engines like Fincite Core, banks keep client portfolios in shape based on inputs like the following:

• Investment Strategy: Target Asset Allocation and Product Galaxy
• Market Development: Current events on the markets
• Financial Situations of the Client (based upon his connected Accounts
• Objectives and Planning of his investments

Summary

These three general strategies show how the Private Banking industry is reacting to the emergence of Robo Advisors. In the future, we will see more banks adopting these strategies in a pure or combined way.