Three-fourths of wealth managers in Australia lowering costs to compete with robo-advisors, finds GlobalData

Robo-advisor services are no longer the reserve of the retail segment, as Australia’s rich are increasingly open to digital channels and spreading their fortunes across providers. As a result, more than three-fourths (76%) of Australia’s wealth managers are feeling the pinch and lowering costs to compete with robo-advisors, says GlobalData, a leading data and analytics company.

Data from GlobalData’s 2020 Global Wealth Managers Survey* shows that Australian high-net-worth (HNW) investors now use an average of four different providers, as the uptake of automated investment services is increasing.

Growing adoption of robo-advice among the wealthy has a significant impact on traditional players’ bottom lines. Not only are wealth managers losing market share, but the low-cost business models are putting pressure on traditional providers’ margins.

Heike van den Hoevel, Senior Wealth Management Analyst at GlobalData, says: “Our data shows that eight out of 10 wealth managers agree that HNW clients are increasingly fee-sensitive due to the rise in robo-advisor services. Accordingly, 76% of wealth managers in Australia (compared to 61% globally) indicated that they have already lowered or plan to lower their fees to compete with automated investment services.”

While price is an important factor in the advice selection process, an analysis of the drivers for and deterrents of automated services shows that wealth managers should not neglect other aspects.

van den Hoevel continues: “The two single most important reasons why Australian HNW investors opt for robo-advisors are a loss of trust in traditional advisory channels and a belief that these services yield similar or better returns than other options. On the flipside, a desire to talk to a human advisor and the often still-limited investment range of robo services represent the two main deterrents.”

Consequently, rebuilding trust to create better customer relationships has to be wealth managers’ main concern.

van den Hoevel concludes: “As long as an impersonal algorithm enjoys greater levels of trust, any fee reductions are unlikely to entice investors. In addition, highlighting a positive track record and the benefits of a wide range of investments – especially as ongoing market volatility calls for greater levels of diversification – will be critical in retaining clients in the current crisis-plagued environment.”

2020 Global Wealth Managers Survey*: In Q2 2020 GlobalData undertook 16th annual survey of wealth management companies from 19 countries – Australia, Belgium, Canada, China, Denmark, France, Germany, Hong Kong, India, Indonesia, Norway, Singapore, South Africa, Sweden, Switzerland, Taiwan, the UAE, the UK, the US – to gather their views on a variety of industry issues as well as their HNW clients’ attitudes and behaviors. A total of 371 wealth management executives in a variety of senior roles were interviewed by telephone to complete the survey. In Australia 20 wealth managers were surveyed.

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