AGEFI Luxembourg: Robo-Advisor article

Robo-Advisors, Technological Business Models for Small and Medium Advisers

The financial services industry is cur- rently undergoing a significant transformation in the way that their advisory services are being provided and delivered to their individual investors.This is being driven by a number of factors including new regulations, changing demographics and technological progress.

These changes are occurring at a time when the need for financial advice has never been greater, as savers deal with the challenges of prolonged low and negative interest rates on high levels of cash, inadequate savings, longer life expectancies, and a greater expectation for them to take responsibility for their finances. In 2014, robo-advisors were seen as a threat to their human counterparts. However, only a year later in 2015, we have come to believe that they can work together. In fact, a hybrid route seems to be the best way forward with a robo-advi- sor complementing a human advisor in giving financial advice. This provides numerous benefits including faster Asset Under Management (AUM) growth, the identification of new opportunities in upcoming market segments including millennials with more opportunities to sell high-margin finan- cial advice.

We have now the landscape within which there are a number of different options for introducing robo- advice capabilities, including free standing robo- advice (direct channel), a product offering through a call centre based advisor channel, product “dis- tributed” through full-service advisors and a toolset embedded in the platform supporting a broad range of advised products.

Robo-advice has already had a significant impact on the wealth management industry with the use of Exchange Traded Funds (ETFs) within their port- folios, transparency and lower fees which have allo- wed smaller investors initially rejected by traditio- nal financial advisors to now invest their funds.

While established financial organizations adjust their business models accordingly, small and midd- le financial advisers may find themselves at a signi- ficant disadvantage in the marketplace due to them not being able to compete at a reasonable price. With these small and middle financial advisers in mind, TechRules has developed and standardized technological solutions which can be implemented easily and with a cost that is “in-line” with the size of their business.

Although we offer many different platforms, two that have proved very popular are T-Advisor, an advanced wealth management tool for self-directed investors and our robo-advisor, an online discretio- nary wealth manager providing a personalized, globally diversified portfolio designed to generate long term wealth for its investors.

By using technology, we can manage and grow their wealth for less than the cost of traditional financial services. In summary, we believe that the hybrid route is the way “to go” as the advisor provides the reason for the customer to stay with the digital expe- rience and the technology then becoming the means to provide an omni-channel experience with the right amount of professional support.

For those who would like to obtain more informa- tion on the options available, Flexitime is organizing a conference lunch on “The next wave of digital investors and the role of robo-advisors!” on Thursday, 20 April 2017 at the Cercle Munster.

By Jaime BOLÍVAR, CEO at TechRules (Spain)