Certainly, the cost of financial advice is likely to increase substantially as the industry becomes more professional and advice more strategic. In this business climate, robo advice has an opportunity to grow its market share.
Banks can be an integral part of the evolution of robo advice; it doesn’t threaten their traditional structures. Technology is a positive disruptor in the finance and banking sector and leveraging the benefits it offers — lower costs for higher functions — is a strategic direction that banks are well positioned to take.
But there are three things they should consider before embarking on this journey.
1. Pick your market segment
A fundamental question for any business is to identify its customers. For a robo-advice platform, it is direct customers, especially when it’s estimated that about 80 per cent of Australians don’t get any financial advice. The more than one million self-managed super fund (SMSF) trustees who manage their own retirement savings – the average fund balance exceeds A$1 million – are an obvious target, with more than 50 per cent saying they oversee their own funds without specialist input.
Whatever your target market, think carefully about your choice as it will largely define your product offering.
2. Keep it simple
It should start with a minimum viable product (MVP), meaning it meets a customer’s perceived needs in a way that will sustain your business. It’s imperative to trial any new product as finetuning takes time.
Consider the most basic product every potential customer needs. Experience throughout Asia has taught us to start with an easily understood offering and build from there.
A recently acquired client, DBS (a leading bank in Singapore), provides a good example. Based on customer profile and need, we created a service that incorporates a regular savings plan into a well-constructed asset allocation portfolio to match an individual’s appetite for risk.
3. Establish long-term goals and act now
Businesses need to look ahead three to five years, especially in the digital services space. And they must constantly ask how they can improve their customer offering. Compare your wealth management customers’ digital experience, not only with your competitors but other service providers. If you are not satisfying their need for engagement, simplicity and convenience they’re probably looking to see what your competitors are offering.
In this industry, change is the norm. Even if your first digital wealth product launch succeeded, building a solid foundation of internal expertise and functional capability to trade, settle and manage investment portfolios online to underpin future growth, there’s no time to relax.
Sitting still is just not an option, with Cathay United Bank a prime example. In 2018, it led the market with the launch of the first ‘goal-based investing’ service in the Asia-Pacific region. But the bank continues to add new products for thematic investing and retirement investing, secure in the knowledge they have the architecture in place on which to keep building.
Graeme Brant, senior executive strategic partnerships, Quantifeed