One of the key challenges facing robo advisors – particularly the start ups with no existing customer base to exploit – is client acquisition, and specifically the cost thereof.
Whilst banks and incumbent wealth managers can add robo advice to their suite of products and offer it to their existing customers; the newbies have no such luxury and the cost of attracting customers by traditional methods can be prohibitive – particularly as they are attempting to achieve what has been hitherto unsuccessful by attracting those not currently engaged with investing.
Many of us will have had a Moneyfarm leaflet flutter out of their Sunday paper, and in announcing its first year results (Growing Nicely….), the company confirmed that it had attracted 10,000 customers; however, in doing so, the company had spent the not inconsiderable sum of £2m on marketing, contributing to an overall loss in the year of £6.4m.
The start ups are generally well funded and will have factored this expenditure into their business plans – Moneyfarm remains on course to break even in 2019 – but any initiative that delivers access to a large customer base is welcomed.
Moneyfarm announced one such initiative in February when it signed a deal to deliver a co-branded version of its service to 40,000 Uber drivers – more; then in March it announced ‘Moneyfarm powered by Allianz Global Investors’ – low cost active wealth management for UK employees of one of Moneyfarm’s key stakeholders – more.
To learn more about Moneyfarm, visit its Muckle partner page here
In a world where size really does matter, those with the biggest data are in the driving seat, and the giant etailers, tech companies and institutions that know so much about our behaviour and spending patterns could become the gorillas in the wealthtech space as so many of our financial matters become entwined.
In a world where size really does matter, those with the biggest data are in the driving seat
One of the key objectives of the robo advisors is to ‘democratise investment’ – to reach out to those that have not previously saved or invested; in doing so, the robos produce prodigious amounts of good quality content designed to educate and engage the next generation of investors.
This is Muckle’s raison d’etre – we believe it inevitable that financial self determination will necessarily replace state provision and that those failing to engage will be at a considerable disadvantage – ‘mony a mickle maks a muckle’; whether saving for a property, investing for children or looking ahead to retirement, financial education and engagement is the key.
Muckle will be at the beating heart as this exciting sector develops and eagerly awaits the development of genuine artificial intelligence as robo advice 2.0 is rolled out.
Automated advice may not be for everyone; some may wish to be more hands on in their investments, whereas others may wish to make regular contributions into a digitally managed platform, whist actively managing a portion of their portfolio with an XO broker.
Whatever your preference, sister site DIY Investor sums it up rather well, with due apology to Nike – ‘Do it Yourself, Do it With Me or Do it For me – just don’t do nothing!’
The robo advisors are very much in the DIFM space, committed to making investing as frictionless and intuitive as possible.
financial self determination will necessarily replace state provision
Adam French, CEO of Scalable Capital is bullish about the prospects for robo advice and passionate about opening up the conversation about investments in the UK and bridging the wealth gap that exists between the rich and the mass market.
He told Citywire: ‘we need to get more people invested generally. It is good for wealth inequality for the mass market to invest.
‘The problem you have now is you have the 1% investing and earning 7% returns per year and you have the mass market in cash earning 0% a year.
‘The rich are getting richer and the mass market, unfortunately, cannot keep up,’ he said.
Scalable Capital’s proposition differs from other robo advisors that deliver ‘advice’, in that its proposition is ‘digital discretionary investment management’; Mr French does not rule out offering full blown advice in the future subject to the requisite permissions.
To learn more about Scalable Capital, visit its Muckle partner page here
Now, as robo advisors look to exploit existing distribution channels, Scalable Capital is looking at partnering with commercial entities such as retailers to offer a white labelled automated advice proposition.
Mr French believes in the potential for partnerships as retail companies with existing white-labelled financial services such as insurance and credit cards, look to add robo advice as an investment vehicle.
Not to be drawn on the conversations that have taken place, it would be queer if companies like Tesco and Sainsbury’s were not in the company’s cross-hairs and Mr French confirmed that interest in the industry is there:
‘We have spoken to consumer-facing corporate businesses on this front, ones that are looking at this as part of their financial services group,’ said French.
‘If this [robo-advice] sector takes off it is the perfect proposition for them to start offering alongside the insurance and credit card services they currently offer on a white labelled basis,’ he said.
robo advice will inevitably gather momentum because it addresses real and present issues
In acknowledging the challenge posed by client acquisition, he said that he believed that the market was ready to match automated investment services with millions of clients via a third party, and that when that happened it would signal the coming of age of the robo advisors.
‘The challenge is customer acquisition. I have to work a lot harder for the marginal client than Old Mutual Wealth or Barclays for example.
‘As soon as a big player launches the service it is my belief it will be a huge success.
‘If you have access to millions of clients who have money, people will use this service,’ he said.
Not yet fully in the public lexicon, robo advice will inevitably gather momentum because it addresses real and present issues; scanning today’s paper there are stories about the inequity of student debt, the advent of the WASPIs and the crippling cost of accommodation.
Couple that with the fact that inflation is at 2.6%, yet the best fixed term Cash ISA from Bank of Cyprus pays just 1.22% and the folly of remaining in cash is clear.
Whether it is by attracting those new to savings and investment, or turning savers into investors, Muckle is committed to raising awareness of robo advice, and playing its part in the growth of the wealthtech sector.