German robo-advice experience points to answers
Close to 90 per cent of German wealth managers working with high net worth (HNW) individuals believe they have already begun to lose some of their market share to automised investment services, according to market researcher, Verdict Financial.
Verdict's financial services report showed that of Germany's developed markets, HNW clients showed the greatest interest in robo-advice platforms and therefore the greatest possibility of switching to them.
While statistics showed that traditional wealth managers believed themselves to be atop a two-year slippery slope, Verdict's senior analyst, Bartosz Golba, noted that HNW client's uptake of digital advice platforms was lowest in markets where robo-advice was already an established option, thus ruling Germany out.
"The initial emergence of robo-advice platforms in...highly developed regions was generally expected, however, wealthiest in mature economies have longstanding relationships with private bankers, and are not prone to switching to digital-only propositions," Golba said.
When compared on an international scale, Golba identified German millionaires as ‘slightly different' to their global counterparts, with the appeal of a hassle-free way of balancing their portfolios the main factor that could attract them to robo-advice.
Germany was found to be the fifth most interested country in robo-avice solutions behind the Phillippines, Brazil, China and India. As a direct result, the Verdict report forecast that Germany would experience a rise in sophisticated digital propositions, which in turn must attract and build customer trust.
"Without HNW clients' assets, digital platforms will struggle to become profitable in the long-term, and their business models must therefore evolve to meet HNW individuals' needs," Bartosz said.
"The main challenge for every new entrant to the robo-advice space is client acquisition."
Bartosz concluded by calling for collaboration between traditional players and challengers, citing the benefits of firmly established financial practices when combined with the possibilities of digital innovation.
"Traditional wealth managers can actually help to bring robo-advice to the next level. With their huge budgets, incumbents can invest more in developing new technologies, and do this in partnership with robo-advice platforms provided by financial technology start-ups," he said.
"In this way, we will see a growing number of deals between traditional players and challengers being signed across the globe."
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