Interesting headline in last week’s Citywire Wealth Manager: Trusting the unknown: 91% of people reject robos. It refers to the fifth ING International Survey Mobile Banking 2017 – New Technologies report, which surveyed 15,000 people in 15 countries, chosen to be representative of their local population (rather than because they have actual assets to invest).
In spite of the damning headline, the data shows that allowing a computer program to make decisions is not out of the question for some people, with a fifth (21%) of UK investors saying this would be an option if they got final approval. Less than half (42%) of the 1,000 Brits who took part said they don’t want automated financial activities at all.
As I highlighted in my last blog, I believe advisers who rely on passive-focused model portfolios as their investment choice for clients are most at risk when it comes to the growth of direct to consumer investment platforms. This is because there is little difference between what they provide and what the so called robo advisers are offering, except one – price. Low cost is what the newbie tech-driven firms will capitalise on as they make a land-grab for investors who have tidy amounts already invested via advisers.
Chatting to people at last month’s PIMS conference, it’s clear that many advisers are unconcerned about robo advice, believing it’s not something that will impact on their business model. Maybe they’re right, but with the Canadian giant Wealthsimple having received authorisation from the FCA to launch into the UK, and new online investment firm Moola receiving financial backing from some impressive City investors, the competition for investment assets is building. This means there is likely to be some serious cash thrown at marketing the benefits of going direct.
Although the ING report seems to imply there is little for today’s advisers to worry about, we’re already seeing huge shifts in consumer purchasing powers that we’d find hard to believe just five years ago. The rise of the grocery discounters is one case in point. Who would have thought that Aldi would be snapping at the heels of the four giant supermarkets, with its market share now larger than the Co-op.
Waitrose and Sainsburys customers are shopping around and finding the savings they are making irresistible. The advertising for the two big German discounters – Aldi and Lidl – both focus on the fact their products are just as good (sometimes even better) than the pricier brands at the big four supermarket chains. As word spreads that this is not just hyperbole, it’s bringing a tide of change that is making the established supermarkets more than a little hot under the collar.
The challenge for the supermarkets to is adapt to meet the challenge posed by the discounters. It won’t be long before advisers find they have a similar challenge. Luckily, tools exist that enable advisers to offer far more than simply cheap investment portfolios. Smart advisers are already putting strategies in place that future proof them against the robo threat. My fear is that those that do nothing now could, in the not too distant future, find themselves cut out of the investment process and wondering how they can maintain an income that makes being in the business worthwhile.