Exclusive: Robo-Advisor Sector Didn't Eradicate Need For Humans - Report

Robbie Lawther

30 August 2018

The emergence of robo-advisors initially triggered a sense of panic in the financial services industry, but robos did not replace human advisors, nor did new companies eradicate established players, a new report has found.

The report “How to build the best Robo- Advisor Platform - Solutions and Vendors for automated investment services” by Swiss research company , has analysed technology vendors for automated investment services. It looks at how they can support financial services firms to build successful robo offerings for their clients. The analysis is based on in-depth interviews with robo-advisors, technology vendors and wealth managers, with benchmarking and ranking of 10 vendors around the world against 50 criteria.

MyPrivateBanking found a number of trends and features in the B2B robo-advisor space:
- B2B robo advisory is a hybrid space. A common aspect of the observed vendors is that their offers implement the principle of hybrid investment advice at their core. The bulk of B2B providers integrate a human element in the digital advice space by providing varied contact options, as well as collaborative work options such as screen sharing and remote-access features.

- Specialised and “technology first” providers are players in the B2B fintech space. More and more financial institutions are deciding not to develop their own solutions; instead, specialised technology providers bring the tools, and financial institutions bring their investment and client know-how to the table.

- No more out-of-the-box robo-advisors—flexible and modular offers instead. Flexibility, adaptability, and ease of integration are currently the leading characteristics of what makes a B2B robo a competitive offer. B2B robo-advisors are expected to be more than a simple cookie-cutter, out-of-the-box product.

- The lack of AI and big data is the Achilles heel of some B2B solutions. Advanced data management and artificial intelligence (AI) are often weak spots in specialised tech solutions, although an increasing number of providers are experimenting with the concepts of machine learning, data analytics and even blockchain.

“Wealth managers and other traditional financial services companies can gain incredible leverage by employing new technology investment solutions, not created in-house but offered by those who do it best: robo-advisors and robo technology vendors,” said Anna Schneider, analyst at MyPrivateBanking.

MyPrivateBanking came up with a set of recommendations for how wealth managers can identify their perfect software solution provider:
- Wealth managers should know their requirements - The choice between different functionalities, not to mention different providers, can be overwhelming. Therefore, before considering which provider to work with, it is essential to know what specific functionalities and features are important.

- Knowledge of targeted customer segments - Different sets of clients might have different requirements when it comes to advisor contact, automation, and cost effectiveness, among others.

- Consideration of budget limit - A specialised and customised integration of a provider that works with each client on a project-by-project basis will prove costlier than a plug-and-play solution. Some providers offer an end-to-end service spanning the spectrum of back office, portfolio creation, front office and communication features, while others will offer singular features related to any (or all) of these areas.

- Wealth managers should not be afraid of a tech-forward approach - While many financial institutions and wealth managers prefer to stick to the status quo, innovation-driven fintech start-ups are gaining momentum with conventional banking customers.

“Today’s B2B robo platforms are offering many advantages to financial institutions - especially compared to an in-house approach,” said Schneider. “However, we also see a need to quickly improve and progress on the advanced features of these solutions. In particular, predictive analytics and advanced data management are critical weak spots of many providers today.”