Robos need to try harder to differentiate themselves
Most robo advisors are offering identical products, they can’t all survive
At last week’s Finovate Europe event there were a notable amount of robo advisors showcasing their products. However, I struggled to see a fundamental difference between their offerings.
The phrase “democratising wealth management” is often thrown about. Nutmeg’s founder, Nick Hungerford, often used this as a promotional statement in the early days of the company. Yet, at Finovate many of the robos were echoing this statement – which was woefully lacking in originality.
The lack of unique-ness is pervasive amongst these robo advice players’ product offerings. Most offer a “goals” based approach, where the underlying investment is a collection of passively managed ETFs. The only differentiator would be the user experience, fee structure and how well the service is marketed.
The investment performance is likely to be fairly similar, with most of the investments being allocated to fairly generic indices such as the S&P 500 and the FTSE 100.
Where the automated advisory companies can differentiate themselves is by providing active management services. However, the amount of work involved may make it out of reach for the robos, who largely have insignificant assets under management.
This gives an opportunity for the traditional players to step in. Having large amounts of capital on tap and vast research teams, they are well placed to offer more sophisticated online wealth management platforms. Swiss giant UBS is going down this path and is set to release its robo advisor, SmartWealth, in the next few months. Where it differs from the slew of fintech robos is that its investment proposition reflects UBS’ house view, and provides an active management approach.