schapiro ken presentation final - fpa norcal · •crm. fpa norcal conference opportunities for...

FPA NorCal ConferenceFPA NorCal Conference

DigitalAdvice

TheTransformativeEffectRoboandDigitalAdviceareHavingon

theIndustry


BiggestMisconception:WhyRobosarelikeHeli-Skiing


BiggestMisconception:WhyRobosarelikeHeli-Skiing

• RoboInvestingisLikeHeli-Skiing• Notcomplextradingalgorithms• Passiveindexstrategies• Most“robotic”partisonboarding


WhatisRobo-Advice• Providersofalgorithmicallydrivenautomatedfinancialadviceandinvestingservices

• Automatedaccountopening• Automatedrebalancingandtax-lossharvesting• PioneeredbyBettermentandWealthfront


Definitions

• PureorDigital-OnlyRobo:Aproductorofferingthatdoesnothavetheoptiontospeaktoliveadvisors• HybridRobo:Aservicethatcombinesdigitaladviceandtheabilitytospeakwithliveadvisors• IndependentRobo:Notanofferingfromanestablishedfinancialservicesfirm


GrowthofanIndustry

• Over$200BillioninAUM• Largefinancialinstitutionsaddingroboadviceproducts

• ManyofferingsYoYAUMgrowthatorabove100%

• Stilllessthan1%oftotalUShouseholdfinancialassets

• $1trillioninAUMby2020(AiteGroup)• WorldwideAdoption


TheMisconception#2:Onlylowassetandyoungclients

• Percentofclientsoverageof50:– VanguardPAS:~85%– SchwabIntelligentPortfolios:>50%– MerrillEdgeGuidedInvesting:>45%

• 40%ofPersonalCapital’sAUMisfromclientswithover$1millioninvestedthere

• Vanguardhasa$50kminimum• Dependsontherobo,someofferingsskewmuchlower(Acorns,WiseBanyan)


TheMisconception#3:Traditionaladviceclientsareflockingtorobos

• Attractionisstrongesttonew-to-investingclients– Firsttimeinvestors–Previouslyselfdirectedinvestors

• Robosaregainingmarketsharebyexpandingmarketsmorethanstealingsharefromtraditionaladvice


Transformativeeffect#1:Onboarding

• Mostinnovativeaspectofroboadvice

• Marketingdifferentiator• Costofcustomeracquisitionmuchloweratroboadviceproviders

• Currentadvisoronboardingprocessesareoutdated

• Clientparticipationinonboarding• Mostefficientprocessinindustry


Transformativeeffect#2:DigitalClientCommunication

• Clientcommunicationthroughpersonalizedemails

• A.I.basedonengagement– Eventdrivencommunication– Communicatingrightinformationatrighttime– Leadstobetterdecisionmaking– Adviceonhomepurchase,education,weddingsetc.

• Masscustomization=Efficiency• Modelsallowportfoliospecificcommunicationatscale


Transformativeeffect#3:PriceCompression

• Betterment–DigitalOnly:0.25%–Hybrid:0.40%

• Vanguard–Hybrid:0.30%

• Schwab–DigitalOnly0.00%–Hybrid:0.28%

• WiseBanyan–DigitalOnly:0.00%


Transformativeeffect#4:Branding• Shiftingpowerfromadvisorbrandtocompanybrand

• Youngroboinvestorsareattachedtothecompanybrand

• Robosarethenewestproprietaryproduct


BrandingCont.:DiscountBrokersvs.Wirehouses

• DiscountBrokershavemasteredbrandingtothecompany

• Atwirehousestheadvisorbrandisoftenstronger

• BrokerProtocol• Roboshelpbrandtothecompany


Transformativeeffect#5:EmergenceofHybridAdvisor

• VanguardPAShas~4timestheAUMasnextclosestRobo

• Strongtrendtowardshybridofferings

• Helpsrobossegmentmarkets• Investorscan“graduate”ifcomplexityofsituationchanges


Transformativeeffect#6:MarketSegmentation

• Differentinvestors=Differentneeds• Robosofferingdifferentlevelsofservice–Bettermentnowhasliveadvisors

• Clientscan“graduate”tohigherlevelsofserviceifsituationchanges• Helpsexplainrapidadoptionbyincumbents


Transformativeeffect#7:MarketExpansion

• Besttractionwithnew-to-investingandself-directedinvestors• Expandedaccessibilitytoprofessionaladvice• Impliesroboadvisorsareexpandingsizeofmarketforadvice• Meanslesscompetitionwithtraditionaladvicethanmany

believe


MarketExpansionCont.• TotalMarketofUSinvestors:~135MillionUSAdults• ~65millionadultswhohavelessthan$100kininvestable

assetsbutareinvestedinthemarket.– Adultswithlessthan$100kininvestableassetsmakeup71%of

theUSadultpopulationbutonly4%oftotalinvestableassets.• ~25millionadultswithatleast$500kininvestableassets

– Represents~80%oftotalhouseholdinvestableassets• ~70millionadultswithatleast$100kininvestableassets

– Represents~95%oftotalhouseholdinvestableassets

EstimatescreatedfromUSCensus,Gallup,andCerulliAssociatesdata


0%

10%

20%

30%

40%

50%

60%

70%

80%

>$20Million $10- $20Million $5-$10Million $2-$5Million $500k- $2Million $100k- $500k <$100kInvestableAssetsperHousehold

InvestableAssetsbyWealth

%ofTotalUSInvestableAssets %ofTotalUSHouseholds

MarketExpansionCont.


Transformativeeffect#8:VCbackeddisruption

• Buyingmarketsharewithoverlycompetitiveprices• Manyiterationsofroboproductsduetolargeupsideandscalability• Customeracquisitionscostsaslowas$20-$50butmoretypicallyinthe$100’s


TransformativeEffect#9:OnlineFiduciary/RIA

• Unprecedenteddefinitionoffiduciary• Transforminghowwethinkofadvisorsandtheroleoffiduciary

• Manyresponsibilitiesonclienttoprovideaccurateinformationandunderstandlimitationsofroboadvisors

• Digital-onlyonlinequestionnaireshavenotbeenstruckdownduetosuitabilityrequirements


TransformativeEffect#10:NonFinancialFirms

• Reducesbarriersofentryforprovidingadvice

• Needminimalcapitalmarketsoradvisorexpertisetolaunchadigitalonlyproduct

• Overstock.com• WillGoogleorAmazonfollow?


Transformativeeffect#11:AccountAggregation

• Notjustrobos:Banks,Fintech,etc.• Consolidatedfinancialpicture• Holisticadvice• Funnelassetstowardsadvisor• Increasedvisibility=Increasedopportunities–PossibletoleverageA.I.foropportunities


Transformativeeffect#12:ModelsandScale

• Modelsmakeportfolioconstructionscalable• Makesportfoliospecific,masscommunicationpossible

• Allowsrobostomassmarketandkeepminimalbackofficesupport

• Possibleforoneinvestmentcommitteetomanageinfiniteaccountsandclients

• Useofmodelsgrowinginotherareas(modelmarketplaces)


Transformativeeffect#13:Comparability

• Wideruseofmodelsopensthedoorforcomparisonsatmanager/advisorlevel– Accountscanprovideawindowintoadvisor’spractice

• Littletonoaccessibleperformancedataonadvisors

• LowadoptionratesofGIPS• Increasedtransparencyisgoodforclients• Transparencyandcomparabilitywillbringdisruption


ComparabilityCont.:BackEndBenchmarking&TheRoboReport

• Openedaccountsatlargestmostprominentroboadvisors

• Publishesperformanceandreviewsofservices

• Coveredin:WSJ,Barron's,Money,InvestmentNews,Kiplinger's,AAIIandmanymore

• BringstransparencytotheRoboadviceindustry

• SuperDisruptive


TheRoboReport

• Dispersionofassetallocations– Internationalrangesfrom20%toover50%– Largerdifferencesinfixedincome

• Valuetiltiscommon,growthtiltisrare• Typicallysimpleportfolios–Vanguardhasonly5ETFs

• Verylittletrading


TheRoboReport

• Schwabhasmostconsistentoutperformance• AcornsandWealthfronthavelaggedthegroup

• Leaderalmosttripledlaggardreturnsinfixedincomeovertwoyearperiod

• Equityperformancevarieswidelyquarterlybuthasrevertedtothemeanovertime


TheRoboReportRecentResults

• Diversityinfixedincomeportfolios(Global,High-Yield,etc.)

• Activestrategies/fundspostedstrong1stquarterresults

• AcornsandStashlargestnumberofclientsbutsmallestaccountsize

• VanguardandSchwabhavelargestAUMbutmanywereexistingcustomers


TheRoboReportRecentResults


OpportunitiesforTraditionalAdvisors:Efficiency

• Models–Possibletocustomizeonaperclientbasis

• Tradeordermanagementsystems• Transferofaccounts• Onboarding• Ismybusinessmodelscalable?


OpportunitiesforTraditionalAdvisers:DigitalCommunication

• Blogs• Massemails– Canbecustomizedbyportfolioorothergroups

• Reusablecontent• Articles• Onboardingprocess• CRM


OpportunitiesforTraditionalAdvisers:RoboAdoption

• WhiteLabelProviders:Betterment,Schwab,Jemstep,SigFig,FutureAdvisorandmore

• Ofteninvestmentoptionorotherrestrictions• Howdoesthisfitintomybusinessmodel?• Needtoachievescaleandamarketingplan• Fitexistingneedforyoungergenerationorlowassetsclients

• Possibletoexpandclientbase


OpportunitiesforTraditionalAdvisers:DefineandDefendValueProposition• 20/20/20BPSfor$2millionrelationship– PortfolioConstruction– FinancialPlanning– Relationship– Trendingdownwards

• HowdoIstanduptoVanguardsofferingwhichcosts30bps?

• Doyouofferplanning?• Whatothervalue-addservicesaboveandbeyondahybridrobodoyouoffer?


OpportunitiesforTraditionalAdvisers:Aggregation

• Holistic=Betteradvice• Visibility=Opportunities• Candifferentiateanadvisor• Abilitytostudydirectcompetition• Highvaluetoclients


WhereisRoboAdviceHeaded?• OnlyafewindependentRoboswillsurvive– Costofcustomeracquisitionandbrandrecognition– Needformassivescale– Increasedcompetition– Incumbentshavemorerevenuestreams

• Permanentfixtureofadvicelandscape• Furtherintegrationofdigitalandtraditionaladvice• Pricingpressureacrosstheindustry• Pressuretraditionaladvisorstobeefficientandprovidevalue


TheFutureofData

• Aggregationallowsforunprecedentedviewintoaclient’sfinanciallife• Alsoallowsaviewintooutsideadvisorsstrategiesetc.• Marriageofinvestingandtransactionaldata• Whoeverhasthemostdatawins


BeyondTheRoboReport:BackEndBenchmarking

• Developingapersonalfinanceappwiththegoalofbringingtransparencyacrossthefinancialservicesindustry

• Willleverageuseraccountstocrowdsourcedataonadvisors,services,andproducts

• Robustbenchmarking,planning,budgeting,performance,andsingleviewofuser’swholefinancialpicture


Returninsightsfromuserdatabacktothecommunity

– Peercomparisons• Performance• Investmentselection

– Advisorcomparisons• Fees• Performance• Strategies• Services

– Strategiestomodifyinvestorbehavior– Provideusertransparencyoffinancialservicesindustry


BeyondTheRoboReport:BackEndBenchmarking

• Disruptionthroughtransparency• Unbiasedthirdpartyopinionforinvestors• Arbiteroffinancialservicesindustry(nocustodyofassets)• Seekingfundingin3rd and4th quartersof2018


Questions?Contact:

[email protected]

schapiro ken presentation final - fpa norcal · •crm. fpa norcal conference opportunities for...

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