Robo-Advisory model at a tipping point and only those willing to change will survive
Nov. 09, 2016
The robo-advisory model is at a tipping point with all current players needing further development if the robo concept is to prove long-lasting. Without further refinement on the part of individual robo-advisors themselves, a substantial portion of current providers will have difficulties succeeding in the long-term. This is one of the main findings of our report "Leading Robo-Advisors 2016 - Benchmarking the current automated investment landscape and mapping the road ahead" for which we analyzed and ranked 30 leading robo-advisors worldwide that were selected to achieve a balance in the following ways: global coverage, provision for different investor market segments, pure as opposed to hybrid robos, and standalone platforms and those provided by large institutions or third party specialists.
The global benchmarking of robo-advisor platforms is carried out under the following headline topics: user-friendliness, the quality of the content; contact and interactivity, social media integration and as well mobile accessibility and availability. The report identifies plenty of examples of good practice at the level of these individual areas. However, no providers are yet coming close to offering an end-to-end consistent level of excellence. We see that most robo-advisors are good at some features, but at the same time missing out completely on other important ones. While this was tolerated by clients at the start of the robo-advisor breakthrough, they now demand a top-performance throughout the full process, from comprehensively explaining the services to superior portfolio reporting.
Schwab intelligent Portfolios, Indexa Capital and Nutmeg top ranked robo-advisors
MyPrivateBanking’s ranking of 30 robo-advisors from 15 countries awarded the highest scores to the these three platforms:
- Schwab Intelligent Portfolios (USA) – exhibiting great strengths in the key areas of product and process information and client assessment plus user experience (43 points out of 60).
- Indexa Capital (Spain) – a good ‘all-rounder’ with a solid performance in all areas (42 points).
- Nutmeg (UK) – Another example of excellent product and process information coupled with being one of the top three providers of investment knowledge and education (42 points).
The report offers the full ranking of the 30 robo advisors incl. a data appendix detailing the findings for each criteria. The results are further illustrated by featuring core elements of the digital presences of the best ranked robo-advisors.
Most robo-advisors fail to offer a user friendly performance across the full process and all channels
However, with more than a third of the evaluated firms achieving less than half of the possible points, and the highest scoring robo-advisor scoring slightly less than 75% of the maximum available points, MyPrivateBanking sees considerable room for improvement and the report details where the problems are and how these can be fixed.
The report’s evaluation covered 39 different criteria and assessed the performance overall including for the robo-advisors’ websites, mobile apps and social media channels. The key research findings are troubling such as that none of the platforms evaluated have yet developed the robo-advisory model of client recruitment to its full potential are detailed in the report.
In respect to robo-advisors offered by well-established institutions the report sees the need for leading institutions to be more radical and wholehearted in their automated investment initiatives in the next few years, even if this means starting over again with a second robo-advisor to replace their first. Our analysis lays-out the reason for this reluctant adoption of technology by traditional firms, benchmarks their offerings and offers them learning points they can take from the platforms offered by new, stand-alone robo-advisors.
In addition to our overall diagnosis of the state of health of the robo-advisor model and providing individual profiles (with analysis and recommendations) for the 30 platforms evaluated, this report includes a detailed summary of all of our findings and a detailed strategic analysis of the current level of robo-advisor development. This not only gives our overview of how robo-advising is developing but also interprets the different components of the robo client experience and suggests underlying reasons for the current standard of performance.
Only robo-advisors constantly pushing ahead for superior client experience will survive
Our analysis shows that the pioneer years of robo-advisors have come to the end and the market will separate the wheat from the chaff. Too many automated investment services target the same, growing - but still not sufficient - client segment to nurture all or most of them. Still, we also see that the disruption capabilities of robo-advisors are here to stay and the appeal to clients will grow for good reasons.
The report offers a number of detailed forecasts for the robo-advisory sphere over the next few years covering topics such as regulation, the introduction of consultations with (financially) qualified professionals, the role of financial planning functionality, and technology and innovation. It additionally provides our views on the major external threats facing robo-advisors currently.
Based on our in-depth benchmarking and a detailed strategic analysis of status and future of the robo-advisors development, this report concludes a series of recommendations for robo-advisors – stand-alone as well as those who are part of an established financial services – to ensure they will be on the winning side in the future.
About the report:
The report “Leading Robo-Advisors 2016 - Benchmarking the current automated investment landscape and mapping the road ahead” analyzes in detail the strengths and weaknesses of the website, mobile and social media offerings of 30 leading robo-advisor worldwide according to 43 criteria under the following headline topics: user-friendliness, the quality of the content; contact and interactivity, social media integration and as well mobile accessibility and availability. In addition to our overall diagnosis of the state of health of the robo-advisor model and providing individual profiles for the 30 platforms evaluated, this report includes 10 best practices and a detailed summary of all findings and as well a detailed strategic analysis of the current level of robo-advisor development and the future opportunities and threats. More info
Americas: Alpha Architects, Betterment, BMO SmartFolio, Capital One Investing, Connect Invest, FidelityGo, Honest Dollar, RBC Investor Gateway, Rosecap, Schwab Intelligent Portfolios, Vérios investmentos, Wealthbar, Wealthfront.
Europe: Indexa Capital, Investify, KeyPrivate, Money on Toast, MoneyFarm, NetWealth, Nutmeg, Pritle, Scalable Capital, True Wealth, Vaamo, VZ Vermoegenszentrum, Wealth Horizon, WeSave.
Asia-Pacific/Africa: Mizuho Bank Smart Folio, QuietGrowth, Sygnia