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Robo-advice: Is this the future?


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Chris Pitt explored the likely future and profitability of robo-advice at the Goodacre Securities Conference, considering current trends, lessons from the past and future forecasts. Watch the presentation on periscope:

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Robo-advice: Is this the future?

  1. 1. Robo-advice Chris Pitt – Head of Market Analysis 7th October 2016 Is this the future?
  2. 2. 2 Robo-advice: Is this the future? In its current, narrow focus? Probably not
  3. 3. 3 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
  4. 4. 4 Digital channels Why are players so interested? Reach new segments Enhance service Reduce costs Improve compliance
  5. 5. 5 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)
  6. 6. 6 What is the market doing? Market activity is significant and increasing Project Innovate Set 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
  7. 7. 7 Examples of market growth 0 2 4 6 2010 2011 2012 2013 2014 2015 2016 Growth of Betterment AUM in billions of dollars The Securities & Exchange Commission (SEC) 22% increase in its members’ client numbers Nutmeg User numbers on track 2-3 years until profitable 0 1 2 3 2016 2017 2018 2019 2020 Estimated growth of U.S. robo-advisors AUM in trillions of dollars Source: Bloomberg via A.T. Kearney
  8. 8. 8 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
  9. 9. 9 The naysayers are emerging
  10. 10. 10 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
  11. 11. 11 • 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?
  12. 12. 12 • 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?
  13. 13. Thank you Email: Mobile: 07920 135708 Chris Pitt Head of Market Analysis LinkedIn: Christopher Pitt Twitter: @chrispitt11