During the FinTech wave two years ago, we began an intensive and continuous evaluation of all emerging and existing robo-advisors.
Our study is based on more than 80 robo-advisors. The creators of these robos are FinTechs and banks. The aim of this study was and still is to put the market of online advisory offers under the microscope; and at the same time identify successful companies and understand the reasons for their success. Our focus is globally oriented. Most of the robos under observation come from Europe, the USA, Canada and Australia.
What data was collected?
We conducted initial extensive research into the provided tools and associated websites. We were also concerned with the construction of the tools.
Are questions being asked about risk-bearing capacity, risk-bearing settings, experience and knowledge? If so, to what extent? What is the minimum investment amount? Can I maintain one or even several investment objectives?
We reviewed and tested the complexity of the tools, and whether and to what extent simulations are possible. We also analysed the company behind the robo: Is it a FinTech company? In which countries is it represented? In what year was it established, or when did the robo go live? Additionally, we classified the robo for individuality and service level. Where possible, we also collected the number of customers and AuM (assets under management). We considered safety aspects: Is the company regulated? Does it have a license? What identification methods are used during onboarding? With which partner bank is the money deposited? We also collected the countries of distribution, sales focus and product partners.
Cost factor is also decisive for the assessment of robos. We calculated the annual cost for a one-time investment of € 20,000 and then assessed the cost models according to transparency.
How was the evaluation carried out?
First, we looked at factors that say something about the success of a robo-advisor. For one thing, the number of customers and the AuM (assets under management), but also public perception on social media, especially Facebook and Twitter, and Google entries.
Based on these values, we derived a score for each company.
What do we want to achieve with this study?
This study helps to reach strategic decisions. New providers and models come onto the market on an almost daily basis. A systematic decision-making tool can hereby ensure transparency. In our view, the following 6 questions serve as a derivation for a decision-making tool:
- What models of digital investment advice are available?
- What asset management is offered?
- Is regulation consistent with digital investment?
- Best Practice: What models are successful today?
- What developments can be expected?
- How can I reach a future-proof digital decision for my bank?
There are currently 20 providers in Germany, 40 providers in Europe and 100 providers worldwide. The offers vary in complexity, value proposition, degree to which they can be individualised as well as business model.
No fear of compliance
Investment advice is still largely avoided by many offers in the area of MiFID, asset management has become more common and real investment advice for securities is not yet taking place.
Regulations experts expect significant changes here from almost all national authorities. What is coming onto the market and what are the conditions to be observed?
Asset Management and products used by non-invested assets play an increasingly important role in differentiation. Particularly demanding asset management is used by some providers communicatively in a centralised position. We will present you with a typology and an assignment of individual offers, and show you in more detail which consequences the individual methods can have for you and your customers; paying particular attention to your sales, technical and regulatory details.
Think of tomorrow today
Many of the robo-advisors on the market are equivalent to a first-generation development stage. These robo-advisors, however, are almost exclusively used by the “pioneers”. The development of larger customer groups or customer volumes cannot be achieved with this technology. Currently, the third generation is on the market. This generation is already more capable of opening up larger customer groups.
Our in-depth knowledge of the global market of FinTech robo advice offers will help you find the ideal solution for your bank. Not all models record growth rates. Whether cooperation, imitation or adaptation – avoid models that have limited prospects.
We’ll offer you an impulse workshop on this subject. There, we’ll provide facts with a particular focus on the German market. Get access to information that allows you to make clear decisions; even if this means that your bank offers no digital investment. We’re currently expanding the study with a few details. You can find out even more in a few weeks.
Author: Christian Neuenhaus