Ageing IFA market opens doors for robo-advice

Robo-advisers need to capitalise on the ageing independent financial adviser (IFA) workforce and new technology and capital being introduced, as inflows for robo-advisers show a decline.

That was according to financial services research and insights firm, Verdict Financial, which said the ageing, predominantly Baby Boomer adviser base in countries like Australia, Canada and the UK and the US could look to robo-advisers as an exit strategy, who will be seeking new clients to grow their business.

Verdict Financial's head of content for Asia-Pacific, Andrew Haslip, said that robo-advisers, whose appeal lied in low fees through mainly exchange-traded fund (ETF)-based portfolio offerings, were only breaking even despite acquiring pools of client assets well above industry averages.

Companies such as Betterment and Wealthfront would also struggle to thrive this year, he said.

VIEW ALL

View all

"Inflows to robo-advisers, while positive, have slowed and smaller robo-advisors or those in smaller markets such as Australia will remain well below the necessary volume based on current trends," Haslip said.

"For robo-advisers looking to scale up their client assets quickly, the wave of retiring advisers, along with the current low cost of capital, offers a once-in-a-lifetime opportunity, provided they pay for it."

Established robo-advisers could utilise this market to attain the capital necessary to buy the client books of retiring financial advisers and tap into the older, high net worth client base that may never have considered a robo-adviser.

"The clients will benefit from cheaper ETF-based portfolios while robo-advisers boost their client assets. So keep your eye out for the wealth industry's newest trend, the robo-consolidator," Haslip said.