Although the average robo-advisor client is a small investor, digital access to investments is also essential for the wealthiest. Demand for digital and automation will only increase, but advisors and bankers will not be made extinct.
November 2017 saw a number of developments in the digital wealth management space. In the UK, Natwest became the country’s first incumbent bank to roll out a robo-advice service. Just a few days later Nutmeg, the regional pioneer online investment platform, announced its assets under management had surpassed £1bn, with the number of clients doubling in the last 12 months.
While Nutmeg has been growing in absolute terms, the value of an average portfolio held on the platform remains at around £20,000, indicating that the majority of platform users are small investors. This is not unique to Nutmeg. Average account balances among its competitors, including robo-advisors in the US, are not much higher.
However, there is demand for robo-advice among wealthier individuals as well. A third of assets managed by Scalable Capital, Europe’s second biggest digital investment platform, are comprised by portfolios larger than £100,000. The company targets sophisticated rather than first-time investors, and this includes experienced HNW individuals. Findings from GlobalData’s Technology in Wealth Management: Drivers for Adoption and Future Trends report confirm that there is HNW appetite for digital solutions.
The demand for automated investment services offered by established HNW-focused wealth managers is already higher than for traditional execution-only platforms. Furthermore, GlobalData’s survey found that providers expect demand for their algorithm-driven offerings to increase to a greater extent than for discretionary or human-driven advisory services. The industry acknowledges the importance of providing digital access and communication channels to HNW clientele. In the UK, more than 78% of wealth managers agree that these are essential for servicing millionaires.
In countries where the traditional private banking concept is less developed and established than in the UK, digital channels are even more important. Yet personal relationships between advisors and investors are and will remain essential across the world. Moreover, individuals with smaller savings and investments pots, who do not qualify for private banking services, value access to human advisors. For more than 70% of mass affluent investors surveyed by GlobalData, the availability of advisors or consultants is important when choosing an investment management partner.
This leads to the conclusion that financial advisors and wealth managers that are able to offer a successful combination of human and digital capabilities will succeed in the long term. While demand for digital solutions is unquestionably on the rise, making decisions about the financial future is easier with the help of a human being – and this is unlikely to change.
By Bartosz Golba, Interim Head of Wealth Management