The Evolution of Robo-advisory Services

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Robo 3.0: The Next Generation of Investment Decision Making

GreySpark Partners presents a report, The Evolution of Robo-advisory Services, exploring the emergence of robo-advisory services in the investment management space. The report examines robo-advisory services from its rudimentary beginnings in the early 1990s to its current state of flux as the services transition from a state of client base development to one focused on achieving critical mass. This transitory phase is epitomised by the evolution of the business-to-client (B2C) model to a business-to-business-to-client (B2B2C) model, as would be disruptors – innovative fintech players and digital wealth managers – realise that, in order to be profitable, their low cost, scalable business strategies must evolve to ensure that they capture a mass audience.

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The report details how, in 2016, numerous drivers and challenges are at play in the robo-advisory space, including:

  • Regulations – regulators and financial services governing bodies are not yet pushing robo-advisory specific agendas, but are working towards creating an environment that supports their advent;
  • Investment strategies – a general shift from actively-managed to passively-managed strategies by investors as active strategies come under increasing scrutiny regarding their fees structures and overall returns, thereby pushing investors towards exchange-traded funds , which are currently the stalwart of robo-advisory services;
  • Client on-boarding costs – the costs of customer acquisition for fintech players and digital wealth managers are undermining the B2C model and are advancing the case for B2B2C-provided robo-advisory services; and
  • Independent advice – tied-advisory services are being displaced in favour of independent, commission-based advisory services wherein investment bias is mitigated as advisors are not receiving commissions from product manufacturers.

Institutional wealth managers – in response to client demand for online services and the presumed threat that fintech and digital wealth management entrants to the space pose – are increasingly investing in robo-advisory service tools and platforms, with many looking to current market participants as potential acquisition targets. Targeted takeovers in the space would advance the case of the B2B2C business model, and they would allow robo-advisory services to reach their targeted client base at a profit.

Published on: 21 Dec, 2016

The Evolution of Robo-advisory Services – Table of Contents

  • 1.0 Defining Robo-advisory Services
  • 2.0 Robo-advisory Business Models
    • 2.1 The Business-to-Client Model
    • 2.2 The Business-to-Business-to-Client Model
    • 2.3 Pure and Hybrid Robo-advisory Models
  • 3.0 Pre-2016: Robo-advisory 1.0
    • 3.1 Contributing Factors to Robo 1.0
  • 4.0 2016: Robo-advisory 2.0
    • 4.1 Regulations
    • 4.2 The Shift from Active to Passive Investment Strategies
    • 4.3 Challenges
    • 4.4 Distribution Model
  • 5.0 2020: Robo-advisory 3.0
    • 5.1 Non-financial Players Enter at Scale
    • 5.2 Data-as-an-Asset
    • 5.3 Artificial Intelligence
  • 6.0 Appendices
    • 6.1 Table of Figures
    • 6.2 Glossary of Terms