robo-advice: is this the future?

Robo-advice

iress.com

Chris Pitt – Head of Market Analysis7th October 2016

Is this the future?

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Robo-advice: Is this the future?

In its current, narrow focus?

Probably not

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Robo-advice: Is this the future?

Let’s broaden our definition to…

“The use of digital channels”

Any sales or advice process where the

consumer serves themselves to some extent

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Digital channels

Why are players so interested?

Reach new segments

Enhance service

Reduce costs

Improve compliance

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Robo 2.0

We’re already moving into a second phase of

robo / digital advice development

Players are tackling the barriers, like

finding cheaper ways to acquire

clients

Going beyond the narrow focused US style online

investment management proposition

Even developing intelligent

technology to interpret client

emotions (risk profiling)

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What is the market doing?

Market activity is significant and increasing

Project InnovateSet up by the FCA to encourage UK fintech growth

500+ requests

250+ supported Many with a robo-advice model

More new start-up platforms

Investment Managers, Life Cos & Banks

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Examples of market growth20

10

2011

2012

2013

2014

2015

2016

0

Growth of Bet-terment

AUM in billions of dollars

The Securities & Exchange Commission

(SEC)

22%

increase in its members’ client numbers

NutmegUser numbers on track

2-3 yearsuntil profitable

2016

2017

2018

2019

2020

0123

Estimated growth of U.S. robo-advisors

AUM in trillions of dol-lars

Source: Bloomberg via A.T. Kearney

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What is fuelling market growth?Government

Pensions Freedom

Baby-boomers

Rising consumer

expectations

Pension crisis

warnings

Millennials

Success of online

banking

Advice gap

Market growth

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The naysayers are emerging

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The naysayers are emerging

“It will never catch on” - always a sign that the winds of change are blowing strong

“The horse is here to stay but the automobile is only a novelty - a fad.”President of the Michigan Savings Bank, Adviser to Henry Ford’s lawyer, 1936

“The internet will soon go spectacularly supernova and in 1996 catastrophically collapse” Inventor of the Ethernet, 1995

• The automobile• The telephone• The internet• The household computer

• The iPod, iPhone and iPad• Facebook• Online shopping• Music streaming

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• Only time will tell

• Many technology initiatives do fail and timing can be an issue

• Disruptors typically take a while to become well-adopted and generate a profit

So, is robo-advice the future?

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• Several robo-advisers have already made a profit by selling to bigger players and others are on track

• We are seeing promising levels of both supply and demand in the robo space

• The direction of travel has got to see the application of more technology, not less

• History tells us that those at the forefront of such change do well and the laggards typically don’t survive

So, is robo-advice the future?

Thank you

iress.com

Email: chris.pitt@iress.co.ukMobile: 07920 135708

Chris PittHead of Market Analysis

LinkedIn: Christopher PittTwitter: @chrispitt11