Focusing on robo-advisors is taking a myopic view of Digitalization

While the Wealth Management industry is finally accepting that automated investment advice is here to stay, by focusing merely on robo-advisors, they are missing the bigger picture of digitalization at their own peril! In my recent blog post, I call out some of the important topics that are not getting enough focus…

Do you agree? What else should they be looking at? Please share your thoughts.

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The transition will be gradual as it was in the book and travel industry 20 years ago. Banks will either become very focused and specialized or just disappear. Barnes and Nobel or the many electronics retailer of the past that amazon replaced as example.
Luckily for the old school FinServ is; that not all customers are ready for this change.
AI as a replacement for for personal advice bears many risk that is completely missing in all conversation I have seen. They are: Compliance - Who programs the algo with how many potential personality profiles (self learning?), can it be explained to a judge in court if the advice result is being challenged? Is there an insurer willing to take the risk for this RoboRIA? Most “Robos” are RIAs with a digital account opening and communication platform. I fully agree with you that he conversation should be about the clients reaching his / her stated goals and how tech can help!

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The main challenge is not about digital “per se”, but accepting the fact that the business model is changes. WM are forced by market regulation and a broader review of the role of private banking In a tax transparent world (just think of Switzerland) to move from a “distributors of products” I to “packagers of advice”. This is not just a marketing or UC problem, but a change in how WM are remunerated (advisory fees bs transactions) which leaves them naked to provide real added value. Added value is not return (nor the exuberant promise of returns) but transparent and intuitive understanding of client goals, personal facts, market dynamics, saving vs investing patters, accumulation vs decumulation needs. This is why banks are holding back, cause they have an incentive conflict and a gap of knowledge. The road is traced, the journey is still long.


@paolo.sironi The incentive conflict is the main “Rubik’s cube” puzzle that the financial service providers have to solve. The only way to offer added value and get compensated, is to be able to offer holistic advice which includes what you refer to as: “transparent and intuitive understanding of client goals, personal facts, market dynamics, saving vs investing patters, accumulation vs decumulation needs”.

Aren’t Detego, Perfitq, and Lifescale, the kind of Fintechs that should be integrated on every WM chain-process? These are focused on lifestyle wellness, before arriving to the narrow domain of portfolio construction and financials securities investing.
Totum Wealth and Riskalyze also?

@GeneK and @andrefassler what say you?


@paolo.sironi @Efi; Agree completely about the shift in the FA role and the incentive structure. Interestingly, I feel that this transition should have happened and should happen irrespective of digitalization. Digital revolution is not increasing the avenues to providing holistic advice but also expectations on the consumer end on how it should be delivered and what should be priced (i.e., transparency). The pace of change needed is much faster just because of how much traditional WM firms need to cover in terms of the digitalization “gap” just to stay current …let alone get ahead.

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The financial services industry still lags in terms of the potential of today’s technology to place the individual or household (notice I don’t call them the customer) at the centre of the experience. Part of this is due to the way the regulators have driven the configuration of a user journey (the advisor journey) that does not resonate with most people. Few people, if any, fill out a risk tolerance questionnaire by choice on a Friday night. Part of this is due to the fact that money, finances, budgeting, expenses, etc. are not emotionally engaging. Some firms are focused on drawing on emotional engagement to frame a financial planning experience.

At Lifescale, our user testing shows that any attempt that is anchored in financial planning will fail to draw in the masses and will only draw in the wealthy. So our approach moves as far away as possible from financial planning.


Very interesting insight on user tests. I can imagine/hypothesize why: as such “planning” is not fun and many people tend to think that you need to have something accumulated before planning. Ameriprise had a good response to its “Dream>Plan>Track” campaign since the ‘planning’ was anchored in something interesting ‘what ifs/ dream’ scenarios.

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It is true that both advisors and clients do not take profiling seriously, which has been a challenge even fkr the wealthy. Yet, if you make the first steps wrong, how can one expect to make the others right?
This is the resin why scenarios (we think as what-if, nobody does mathematically) and Gamification could add to the quest of financial education and better informed decision making. Nobody truly “needs to invest” nor “jump off an airplane with a parachute” but without training. We don’t do the last, but the first?

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@S2E_Consulting could you tell us more about this campaign (links, some info?)

@andrefassler that is a key point methinks. That is why we see relatively little change in the core Private Bank market (average e age 67 I think) but a lot in Unadvised & Mass Affluent that are not served by PB and - at opposite ends of the wealth bar bell - in the Family Offices.

Very good points @Efi and @paolo.sironi
Based on what we are seeing, most of the market will not need either “distributors of products” or “packagers of advice”.

The advisors will be paid based on their role, which is changing. Up until now they have been the distributors of products, so their compensation structure reflects that.

The distribution of products is becoming easier and more streamlined. The advice (which was never the strong point of current ‘sales people’) is in the process of being streamlined too.

1. ‘Advisors’ as providers of advice(1) will keep doing the same: provide custom advice for a small niche of those with complex financial situations. No conflicts of interests here and no vagueness about their compensation. Many will move down on pay ladder and offer fixed fee “hand-holding” services to those who need an actual human before pulling the trigger.

2. ‘Advisors’ as ‘product distributors’ will be all but gone. I won’t bet on when the transition will be completed, but I just don’t see how their services to help select and buy products can be justified 5-10 years from now, where more advanced systems and processes enter the marketplace to satisfy that same need faster, cheaper, easier (2).

(1) - not just ‘KYC + portfolio recommendation advice’, but comprehensive advice covering every aspect of life.

(2) is one of those advanced systems. It could offer a good glimpse into a possible FUTURE since we have an extremely high engagement rate of 53% pointing to a true mass market appeal. People care about LIFE today and they want to make sure they don’t screw up their LIFE tomorrow. They don’t care about financial products, advice, financial plans, budgets…
Perfiqt puts their LIFE in focus and uses gamification to help them drive the process of very comprehensive life planning and product discovery at their own pace (no boring form-filling). As a result, we don’t have to ‘sell’ anything or tell them what to do (advise) - they discover the need and ask for products themselves.

Our paid services include advisor help, but only 40% actually opt for it and they mostly need just “hand-holding” support. The fee is small so clients love it. Advisors love it too since they get incremental revenue with little work. Clients with more advanced needs get escalated to a more involved work with an advisor (small niche).

I think that’s where the market is going and it’s the consumer who’s driving this change (the only heavy-enough ‘object’ to impact the whole personal finance ecosystem). We can try to fight this, or just help them get there.

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@GeneK is Perfiqt in beta version?
Is it only for Canadians for now?
Does it link to providers, so that the user can transact when the decision has been taken?

@Efi, we had it in public beta the whole summer.
We had hoped for high single digits in user engagement. We got 53%! That was huge and changed our game plan: we pulled back the public beta to explore newly available options.

We have a strong interest from potential partners in the US & Canada, so we are about to settle on that one.

Yes: Perfiqt is a self-service on-line distribution channel for financial products and services.
We engage people at an amazing rate and help them discover financial products. Differentiating on products (most of which are completely commoditized by now) is not part of the plan, so we are working on product partnerships for that.

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