Daily Fintech Conversations

The shift to a subscription based advisory model in wealth management

I was reading yesterday a very interesting article from Financial Planning saying that Motif is planning a shift in its commercial offer by launching a new subscription based prodyct. The new product according to the CEO Hardeep Walia would be called Motif blue and will imply a double shift: from the trading business to the wealth management business (yes, they will launch a robo) and from a fee based business to subscription based.
The move is aimed at capitalizing on rapidly changing client demands and capture a new generation of investors, the millenials that represent the largest share of Motif’s clients.

I personallly believe that the subscription based advisory model is the right choice, it is disrupting since it’s marking a distance from the traditional models offered by incumbent firms and most robo advisors.

We as AdviseOnly understood it years ago, and our advisory service has been based on a subscription model since inception. We recently launched AdviseOnlyTutor, a “pocketable” version of financial advice, that is going to become a chatbot as well, which makes a step forward in making financial advice accessible to everybody, and dramatically reduce the trust issues in robo-advisory.

At the end of the day subscriptions are transparent, easy-to-understand and democratic, all the features young clients are looking for as an alternative to traditional banks.

Our cell phone bill, Cable Tv, Amazon Prime and many other things we like and treat us well as customers, are subscription based. Maybe that’s the right approach to make something useful as financial advice a bit more sexy!!

Curious to hear opinion and thoughts from the experts around FintechGenome

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Thanks @serena.torielli for linking the innovations from the US West coast and those out of Italy.

So, AdviseOnly costs 49 euro per year, no matter what the size of the portfolio? Then, the execution costs depend on the broker the investor uses?

Can you share publicly which businesses are using AdviseOnly already (Brokers, asset managers etc)?

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Yes, the 49 euro are the annual cost, whatever the size of the portfolio. The execution depends on the broker/bank chosen by the investor.
The ideal partner for a service like AO Tutor as it is, wouldn’t be a bank but someone big in retail with many users behind (can you imagine if Yahoo Finance had offered something like it?). Independence, high quality, affordability and no conflict of interest make it a “different” kind of offer.

The service could in theory be branded differently by a financial institution willing to design an “investment assistant” for its own products.

Talking general robo-advisory services we are a partner of CheBanca! and Fundstore.it. We also are a partner of several Asset managers like Axa IM, Mediolanum and UBS AM for digital communication and content marketing.

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very good point… is the objective to become an italian Learnvest?

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Hi, the objective is to bring something different and impactful. In Italy or elsewhere. When I thought about AO tutor I had Amazon in mind rather than any player in the financial industry.

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In terms of being “different” and focused on transparency, as we were discussing earlier today @Efi, I would like to share our approach in presenting the YTD performance of AdviseOnly’s portfolios http://cloud.highcharts.com/show/urotor. Performance is meaningless and random unless it is risk-adjusted. Talking performance without mentioning risk has already been causing many troubles in asset management. The X and Y labels are in Italian but I assume are easy to read.

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Here in France, Marie Quantier offers a mixed subscription and fee-based model for advice that clients can implement on their platform (Interactive Brokers for stocks and a French “assurance-vie”). Basic services cost 2.9 euros/quarter and 5% of profits, while a fuller range (with more investor control) costs 17.90/5% and the deluxe version 149/0%. The other robo-advisors seem to be mostly fee-based, with one advertising 1.6% fees including everything (platform management fees, ETF management fees, reweighting, etc).

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With all the above in mind surely it’s time for a radical rethink on how we price financial/investment advice?

Blooom (the fastest growing robo advisor in the US) and Nest Wealth in Canada, are already championing flat-fee subscription models, shifting away from an industry with a lucrative model of charging a percentage of assets under management. When technology lets you scale up investment advice for essentially the same costs, it’s hard to imagine the investment industry can continue to get away with absurd pricing structures – money management for the masses not the privileged few - regardless of how many commas are in their account balance.

https://www.linkedin.com/pulse/its-ok-different-trust-me-andy-hutcheon?trk=pulse_spock-articles

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Bloom is the retirement prodigy in the US robo space! Blooom’s tool analyzes a user’s 401(k) and shows its health through a flower in various growth stages, then offers professional advice on how to allocate funds.
I didnt know they were subscription based! Thks @andrew.hutcheon for pointing this out. They have $300mil AUM in just 20months (ex-Goldman founder).

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