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

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.

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