Is price the key to robo-advice?

3 September 2018

Robo-advice still has a future notwithstanding recent events in the United Kingdom which have seen the closure of some players and the sell-off of others.

That is the assessment of GlobalData wealth management analyst, Sergel Woldemichael following the decision by major player, UBS to sell its SmartWealth platform.

He said that the move did not spell the end of automated service and that lessons could be learned from the UBS experience, not least pricing.

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“Competition in the UK robo-advice space is fierce, and providers of day-to-day banking remain the go-to for arranging investments. A strong brand and reputation can help win clients, but UBS is not a universal bank appealing to a mass market,” Woldemciahel said.

“As the average account balances of the biggest UK robo platforms suggest, robo is currently mostly a mass market game,” he said. “Setting fees at up to 1.8 per cent, while most UK robo-advisors charge less than one per cent, did not help SmartWealth to attract price-sensitive retail investors either.”

“High net worth demand for robo-advice is on the rise, according to GlobalData’s 2018 Wealth Managers Survey, but more so for the next generation of clients. This proves there is still a market for digital investment platforms, but robo-advisors in general may be ahead of their time.”

“While robo-advice is here to stay, it will take time to cement itself. The digitally-savvy next generation will embrace an automated service and big banks should capitalize on this. However, a big brand is not enough to justify much higher fees. To succeed, incumbents will have to provide a level of service, and prices, that are genuinely competitive with those offered by start-ups.”

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