MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Archive for December, 2017

Wealthy and affluent self-directed investors: how wealth managers can win them back

Friday, December 15th, 2017

The popularity of the self-directed investment mandate has been growing rapidly since the 2008 financial crisis and shows no signs of slowing down. We estimate that, in 2017, self-directed investors (SDIs) made up just under a third of HNW AuMs-or around USD 20 trillion.This continuing development poses a clear threat for private banks and wealth managers and, unless established institutions change their strategies, will represent one of the largest disruptive trends of the next five years.

This MyPrivateBanking report analyzes how the HNW self-directed market has developed and how it will continue to do so. The analysis includes comprehensive profiling of the HNW self-directed investor based on a panel survey of around 240 HNW investors from five countries. We draw on behavioral economic research and current quantitative data to forecast the most likely development of the SDI market under different scenarios. The report also examines the supply side of the SDI market, including detailed case studies and competitor analysis of the most notable players in the online brokerage sector.


This report estimates the rates of growth of AuM in the SDI mandate among HNWIs for the next five years under four different scenarios using current and past data on HNW SDIs: Conservative Baseline Scenario, Continued Bull Market Scenario, Market Volatility Scenario, and Bear Market Scenario. These estimations allow for a concrete assessment of how much of a threat the SDI mandate is for established banks and wealth managers under different market circumstances and ideas on how to plan accordingly for each outcome.

Competitor Analysis

This report describes the digital products and tools that are table stakes for self-directed investors, as well as those tools that, although not yet a “must have”, represent a way to get a foot up in the current market. Four detailed case studies on the leading standalone discount brokers with dedicated offers for HNW SDIs provide an inside look at how these actors are taking aim at a client segment that has been, until recently, loyal to traditional wealth management firms. Three further case studies examine three universal banks who have developed specific SDI strategies for HNW clients.

Strategic Recommendations

Based on the quantitative data obtained from a pool of these investors, findings on these investors’ behavior derived from behavioral economics, a five-year forecast for the SDI mandate, and the case studies detailing the most outstanding practices of leading institutions in SDI services, this report arrives to a list of concise, straight-to-the-point, and actionable recommendations. Our report provides wealth professionals with the necessary tools to devise a strategy to counter the threat from online brokers

The report includes cases studies on the following banks and brokers: Capital One Investing, Investec, Westpac Australia Private Banking, Consorsbank, E*Trade, Interactive Brokers, and Swissquote


Standalone, digital only Robo-Advisors: between a rock and a hard place

Tuesday, December 5th, 2017

In our panel survey on Investors’ Attitudes Towards Robo-Advisors we asked 1,000 respondents from five key wealth management markets about their openness towards robo-advisors and about their preferences with regard to investment tasks, technical features and the level of human interaction when managing their assets with such an online platform.

The data shows that affluent and high-net-worth investors are very open towards robos yet have high expectations for them, too. The most remarkable finding is that there is a very clear demand for the involvement of a human advisor. The respondents are very interested in robo features such as financial planning, retirement planning and also asset selection but they do not look for a platform-only solution. While the share of people demanding regular meetings or calls is very low at 8%, 17% state that there should be a human advisor contacting them to give regular updates on their investments. The great majority, however, expects to have the opportunity to reach out to a human advisor if they have questions relating to their investments (66%). Actually, only 9% said that they would expect no human interaction at all. 9% makes a very small target market for pure robo-advisors. So, what should robos like Hedgeable, Scalable Capital or Wealthfront do?

One possibility certainly is to switch their model to a hybrid one, like Nutmeg did last year. Or, they could expand their services and offer B2B services, too, such as Vaamo. No matter which way to go, it is essential for pure robos to know their target market in detail.

Providers of pure robo advice services must make sure to address the right people but also cater for an online presence that helps clients becoming more self-confident regarding their own finances. In our Global Robo-Advisor Benchmarking 2017 report, we found that the leading pure robos indeed perform better in explaining important investment terms such as ETFs (93% of the maximum points compared to 88% achieved by the hybrid robos included). However, in the overall area of coaching, which includes the breadth of topics provided by the educational content websites, multimedia material, and personalization features, pure robos fall behind: only 51% of the maximum points are achieved compared with 54% achieved by the hybrid platforms. Other supportive features such as FAQs or explanation tools and info buttons reveal the same picture.

This is an alarming result and providers of pure robo-advisors are well-advised to not only close the gaps to the hybrid platforms but even do better than them, making human support obsolete. This is the only chance to ultimately defend their market position.