MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Our new report on investors’ attitudes towards robo-advisors is based on a survey covering (mass-)affluent and HNWI in the UK and the US. The 600 respondents answered questions with regard to their awareness of robo advice, benefits and risks of automated investing, awareness of existing players and many others.

One of the main findings is that investors are generally very open to the new technology as more than 70% believe that automated advisory tools can positively influence their wealth manager’s advice and decision-making process. Particularly when it comes to onboarding processes, investors see huge benefits in automated online tools – 74% think that the technology is likely to speed up registration and, hence, lead to an increased efficiency and convenience.

Similarly encouraging, investors’ awareness of the robo technology is surprisingly high: 45% of the entire sample already heard or read about the concept of robo-advisors and 20% state to know quite a lot about it or even know it in detail. At the same time, the share of people saying that they don’t think to be using robo advice in the future is 20%, which is mainly driven by the older age segment with 55 years and above. Interestingly, the share of the hesitant appears to be more than twice as high in the US (28%) than in the UK (12%).

In the US, the largest share of respondents selected Charles Schwab Intelligent Portfolios as the brand they associate most with robo advice (43%) while in the UK, it is Nutmeg that leads the field, with the same share. This is quite interesting since original robo providers such as Betterment (18%) or Wealthfront (13%) seem to be far less known – this is a strong sign that it is a lot easier for established wealth management brands to promote their automated services.

Our new survey report elaborates on these and a lot more findings that draw a very clear picture of wealthy investors’ adoption of the robo advice technology. In addition to the general results, the report describes the main differences among the two focus countries, UK and USA, different wealth segments (mass affluent, affluent, and high-net-worth) as well as different age segments in order to derive valuable recommendations and learning points dedicated to wealth managers’ target client groups.

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Last Wednesday Bloomberg carried an interesting article: ‘For Robo-Advisors the Next Bear Market is Make or Break.‘ It left the question of make or break unresolved but it did have some interesting details about how Wealthfront and Betterment had fared in the first few months of this year, with Wealthfront reporting that it grew its client-base three times faster this January than 12 months previously. Meanwhile Betterment reported that client growth and net deposits had seen peaks in January and March.

The ability of robo-advisors to survive bear markets is still seen as their Achilles heel by some but the counter argument, that the application of behavioral finance insights and in robos’ outbound communication messages about consistent long-term diversified investing helps investors stay on course, seems to be gaining ground.
But isn’t there a more fundamental reason for the resilience of robo-advisors? Investors who start from scratch and grow their investments over a long period are likely to be less affected by aversion to loss(es) than a someone who gives a wealth manager a discretionary mandate for an already sizable fortune. The corollary for this though is that robo-advisors that require a minimum investment (e.g. Personal Capital - $25K, MedioBanca’s Yellow Advice - €20K) or ones with a charging structure that offers much better value for money for larger portfolios, may not have such an easy ride when the markets turn down. Moreover, perhaps there’s a penalty of success for very low cost robo-advisors and younger clients; growing their portfolios successfully and in 10 or 15 years’ time these clients will be a lot more worried about market downturns than they are at present.

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(by Francis Groves, Senior Analyst)

A few days ago, came the news that LPL, the major U.S. broker dealer has agreed that San Francisco-based Future Advisor is to provide its robo-advisor platform. Like other broker dealers, such as Commonwealth, LPL revealed that it was considering a robo solution last year. In our report on Hybrid Robos (February 2016), we looked at how easy it would be for established players (LPL included) would find it to create a hybrid robo/personal contact integrated model. This question is particularly acute for broker dealers as there are marked differences from a psychological perspective between approach of broker dealer client and a typical prospective user of a pure robo-advisor solution. To put it another way, loyal clients of robos and broker dealers probably expect and receive quite different user experiences. We have seen some bold, clever approaches at integrating the two on the part of some major banks but the LPL/Future Advisor initiative is a first. Future Advisor has branched out into B2B solutions (e.g. SaxoSelect and with BBVA Compass and Royal Bank of Canada) since being acquired by Blackrock in 2015. Our expectation is that the LPL robo solution will at least begin as a discrete entity with its own website but that there will be exciting opportunities a full hybrid robo/broker dealer a little further down the road.

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The FinTech market is becoming increasingly complex as new startups emerge and financial institutions come up with own innovations or collaborations with FinTech companies. Yesterday, I came across the latest deal – Goldman Sachs just bought retirement-saving company Honest Dollar that claims to enable employers to sign up in just 90 seconds while offering retirement benefit plans for competitive prices. The process is quick and easy - after having responded to some questions, employees are recommended one of six different portfolios consisting of Vanguard ETFs. Goldman Sachs aim to serve more people with more efficient retirement planning services by partnering with Honest Dollar and, hence, adding to their growing digital offerings. Currently, the finance giant claims, 45 million Americans are not offered retirement plans by their employers, which is mainly due to the high costs.

How important is it for people that they can sign in to such tools quickly and easily? Do they think their financial advisor can make faster and better decisions when using such tools? This and a lot more questions covering affluent people’s attitudes towards robo-advisory services are being answered by our upcoming panel study. Stay tuned! http://bit.ly/1pGGYQt

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The launch of Charles Schwab’s Intelligent Portfolios and Institutional Intelligent Portfolios last year was undoubtedly the most significant robo-advisor development in the U.S. in 2015. MyPrivateBanking  profiled Schwab Intelligent Portfolios in our Robo-Advisor 2.0 report and in our just published Hybrid Robo report, “Hybrid Robos - How Combining Human and Automated Wealth Advice Delivers Superior Results and Gains Market Share” , we take a closer look at Schwab’s Institutional Intelligent Portfolios (SIIP) as one of the report’s five case studies.

SIIP provides most of the advantages of digital investment management with the opportunity for a wealth manager to customize their own recommended asset allocations from a choice of 450 exchange traded funds that Schwab makes available for the purpose.

One aspect of the Institutional Intelligent Portfolios that took our attention was the way in which different advisory firms can use the Schwab solution to enhance their own offering in different ways. For example, it is perfectly possible for a wealth manager to to make SIIP available as an almost completely separate service with its own website and completely different branding. In effect, a registered independent advisor or financial planning firm that did this would be creating their own ‘pure’ robo-advisor. This limits the danger of cannibalizing the firm’s main client-base but it also restricts the possibilities for the users of the robo service. Longer-term, we believe that the future lies with greater integration of the digital component with a firm’s other services to create a hybrid offering of robo features and tools and personal interaction.

The most obvious kind of integration would be full integration on the wealth manager’s website with the SIIP option standing alongside a wealth management firm’s existing services, whether these are discretionary investment management, retirement planning, tax planning, specialist advice services for alternative investments or the other specialist services that a firm has made into USPS. This kind of transparent approach has much to recommend it and it is already being followed by some firms. For a firm specialising in just financial planning but which wants to provide an investment management component, this policy has clear benefits.

One more subtle alternative approach might be to have, say, a client rewards programme that is shared by a firm’s SIIP users and by its full service clients. Perhaps even more effective would be to allow SIIP users to make use of a finance management dashboard like eMoney that your full service clients are already benefiting from. Allowing the users of a firm’s digital offering to participate in behind the log-in features like these signals a much clearer welcome to smaller accounts (which will hopefully become full service accounts in time) than a standalone robo-advisory website can achieve on its own.

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In the course of our research for the forthcoming report on digital offerings for ultra-high net worth individuals (UHNWI) we came across inspiring and challenging campaigns from non-financial ultra-luxury brands. In an effort to better promote their products while also inviting consumers’ feedback and suggestions, the Marc Jacobs fashion house challenged the public to send their offline form of feedback (graffiti their ads) via a Twitter photo (#StreetMarc) and get the chance to attend the fashion show staged by the luxury brand. This campaign also plays the theme of co-creation and linking the offline world with social media.

Connecting online and offline to create a multi-channel experience, luxury brands captivate elitist consumers’ attention by means of innovative ads and events followed by entertaining and less time-consuming quizzes to better understand consumer behavior, collect client suggestions and increase client retention.

There is no magic shortcut and no instantaneous Jamie Oliver recipe for success in engaging HNW/UHNW individuals but there are challenging opportunities for open-minded, passionate advisors and engaged private banks willing to make the best of the latest trends in FinTech, luxury industry or social media. From sharing a wealth of high-quality videos of successful clients’ stories/ case studies on the website or investing time in updating a Twitter stream or blog series as a high-level representative of the private bank, up to integrating indispensable features like a chat tool, digital vault, concierge-like assistance functions especially for the next generation of wealthy individuals, the pool of opportunities is unlimited.

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In our latest research report “Social Media for Wealth Management – Learning from the Best”, we analyzed the social media presences and their popularity of more than 200 wealth managers from around the globe. Our intention was to find out who is the most popular wealth manager on the main networks (Facebook, Twitter, LinkedIn, and YouTube) and to identify major success factors that led to high numbers of likes, followers, and subscribers. Additionally, we took a closer look at Pinterest and Instagram to analyze how wealth managers handle the visual social networks’ specific features, user base, and conventions. While most wealth managers nowadays have an account on Facebook and Twitter, only very few are active on Pinterest and/or Instagram. However, there are clear benefits derived from the industry best practices, they should not ignore:

(Potential) clients see their ‘human face’. Showing the staff, vernissages, branch openings, and sport events visually brings you closer to your clients – and those users who might be clients in the future. Online users like to get the full picture and look behind the scenes and photo and video sharing networks are great platforms that allow wealth managers to offer that.

Great customer support. We’ve seen terrific examples that offered helpful infographics on their Pinterest board, containing FAQs or information on mobile and online offerings. That way, customer support is expanded and presented in an easy-to-understand and engaging way.

Company updates. Posting news and upcoming events helps to keep clients informed about what is going on and makes sure that they don’t miss anything. Especially for HNW clients in might be highly interesting to meet with peers on their wealth managers’ events. Knowledge exchange and networking are additional advantages that help to strengthen your brand and reputation.

Actually, we found few but great examples of well-performing wealth management presences on Pinterest and Instagram. While Instagram is clearly U.S. dominated, wealth managers on Pinterest show a more mixed picture. You can find the case studies for the most impressing wealth management presences on Instagram and Pinterest in our latest report.

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The habits of digital natives have disrupted the sales process in fund and asset management. Many people are using the Internet to do their own research on the firm and product offers. Only late in the process, they will get in touch with the firm they believe is most likely to match their specific needs. For financial service providers it is important to proactively facilitate an engaging communication with prospective clients already during this time in the decision making process.

According to a study by Scorpio and Pershing: “among under 35s, digital sets the direction of search for a financial provider”. When selecting a financial provider, a website is the third most influential factor for those under 35 when choosing a financial provider. The firm´s reputation and Internet search engines are also important decision making factors. Therefore, SEO to enhance website traffic and providing a convincing and interactive website have become the most important factors in the sale process. MyPrivateBanking has just released a report on “Websites for Fund and Asset Management 2016” providing a benchmarking of the websites of the leading 15 fund and asset managers worldwide. The report also gives insights into trends in the asset management industry and outlines the key factors of providing a convincing website.

Read the rest of this entry »

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Digital banks become more and more attractive to millennials who expect secure and convenient banking solutions when on-the-go. Atom Bank (based in the UK) is the latest online bank promoting innovative features that put brick-and-mortar retail banks and wealth management firms under pressure as they have difficulties to keep pace with the latest technology trends. Atom Bank uses a combination of biometric technology empowering clients to authenticate password-free by means of face and voice recognition technology. Another example is the more staid USAA financial conglomerate that already uses IdentityX, the biometric platform by Daon.

The increasing popularity of biometric authentication methods will surely challenge the banking industry and tech giants like Google to offer improved client experience and secure login options. Google’s new password free login allows invited users to sign in their Google account by responding to a notification sent to their smartphone; the new login option fails to add security to mobile users whose smartphones have no lock-screen protection or fingerprint identification option in case their smartphone is stolen. Google will be challenged to offer something more secure and customer friendly – something that could be delivered by biometric authentication.

Client habits and potential regulatory hurdles may slow down the move to biometric authentication but we have no doubt that the future lies beyond manual passwords and (SMS) token. The future will offer a seamless digital experience to every client – from log-in throughout the complete customer journey.

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As digital wealth management is one of the hot topics at the moment in the financial industry, MyPrivateBanking’s analysts have embarked on a journey to evaluate remarkable and innovative features of secured websites and mobile apps for wealth management.

The forthcoming focus-style study ‘Behind the Login – Helping the Wealthy to Connect and Transact’ sets itself apart from the previous benchmarking reports by analyzing exclusively the behind the login content and capabilities of digital offerings for wealthy clients. Based on comprehensive interviews with representatives of leading wealth management firms and intensive analysis, the report explores the current and potential digital wealth capabilities, it shows how the digital strategy for wealth/private banking is defined and provides strategic recommendations and suggestions like the ‘10 essential capabilities for Digital Wealth Management in 2016’.

Don’t miss out this report on the secure site and app offerings for HNWIs! This report will be published soon – please check our website.

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