GlobalData Plc

Wealth managers must respond to automated competition

Not long after UBS signed a partnership with robo-advisor SigFig, it announced plans to launch its own investment service in the UK in November 2016. UBS is not the first to offer investors the ability to place wealth in the hands of an algorithm.

In February 2016, RBC’s Wealth Management division launched a digital platform for HNW clients in the US. Combining human advice with automation, Investor Gateway consolidates investments held with other companies to identify the ideal set of exchange-traded funds. It also provides tax optimization and consolidates investments held with other companies.

The platform is powered by FutureAdvisor, which provides automated wealth management technology. Having been acquired by BlackRock in 2015, FutureAdvisor now focuses on B2B solutions for wealth managers like RBC. Its white-label solution responds to the growing demand by financial institutions to resonate with audiences who prefer technology for investment purposes.

The focal points of FutureAdvisor’s offering are pricing structure and advice services. FutureAdvisor charges 0.5% annually on assets that it directly manages, with an all-in cost of 0.65% when expense ratios and trading fees are factored in. The client does not incur any account opening fees and can discontinue use for free when registered as a Premium user. FutureAdvisor also provides retirement advice. Based on a client’s holdings, FutureAdvisor will provide an analysis and recommend areas in which to improve. Over time, the recommendations are updated based on the performance of the client’s accounts. The advice is free, regardless of whether the client prefers to trade themselves or through an advisor.

The partnership between RBC and FutureAdvisor demonstrates how clients can receive the best of both traditional and digital advice. FutureAdvisor benefits from RBC’s existing client base and brand familiarity in the US market.

On the other hand, Investor Gateway enables RBC to enter the US robo-advice space but stay true to must-have human features that many automated competitors simply do not provide. While some investors may seek human-only or digital-only services, hybrid offerings allow wealth managers to resonate with a range of investor preferences and experience.

FutureAdvisor’s white-label solution is extensive and will no doubt work for other wealth management companies. Our 2016 Global Wealth Managers Survey shows that nearly half of HNW clients use one or two firms to invest wealth, with 58% of their portfolio handled by the main wealth manager. While many investors seek advice from robo-advisors for their low-cost, single-service offering, traditional managers will do well to provide HNW individuals with platforms that combine the best of the human touch and technology.

By Nicole Douglas, Wealth Management Analyst

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