5 reasons why you should have a robo advisor

by Martin Wik Sætre, on 18 March 2020 10:10

Robo advisory is here to stay. Over the last 5-10 years of digitalization efforts, automation has become a key area for most industries. With its very tangible benefits, using robots for standardized back office processes has become an easy win for many management teams. Companies like AVO Consulting has had terrific success and growth helping companies make use of robot technology. Now time has come to automate more advanced customer processes, and the benefits might be more than just efficiency… 

Robo advisory is not a new phenomenon. Many advisors and wealth managers in the US have built automated, online processes where customers can get investment advice. In the Scandinavian market there are several options available. So far, the Robo Advisory marketplace has been dominated by simple, automated processes; logging key customer data like horizon and risk preferences, and providing customers with static model portfolios with low, medium or high risk. But, is this investment advisory? And, is this keeping the customer’s interests as the highest priority? We don’t think so.

Here are 5 reasons why you should get a real robo advisor:

  1. Efficiency
    We start with the obvious. A normal bank have no way of serving its retail customer with one-to-one investment advisory. At best you get a chance to talk about savings the last 2 minutes of a house loan meeting, through your branch employees. If you have a specialized team of investment advisors, they are likely to serve high net worth individuals (HNWI) and other important clients. Retail clients don’t get that kind of service.

    By having a robo advisor you can target your entire retail market without hiring one single specialist, and you can run extensive marketing campaigns to boost sales. You have no bottle neck. 
  2. Personal advice for everyone
    Touching on it in the previous point; individual, high quality saving advice has only been available for VIP clients. Retail customers have been left on their own browsing through alphabetic lists of funds or guided to static model portfolios on banks websites. None of which provide them with real financial advice based on who they are.

    A real robo advisor will capture a customer’s financial situation, saving horizon and risk tolerance, as well as optional personal preferences for sustainability, sectors or regions (e.g. green energy, technology, Asia). Based on this the robo advisor provides an individual portfolio of the best instruments available. The robo advisor will follow up on the customers investments and suggest changes to the portfolio as the markets develop.
    It might even be better than the human service your bank is providing today...
  3. Compliance
    Having humans dealing with both customer risk profiling and instrument selection requires training and trust. Retail saving is a top priority of every banks’ strategy these days, and so it has become a very important area for the regulatory authorities as well. It’s a demanding situation for the central management team when they do not know what is happening in the advisory meetings.

    A real robo advisor can limit this risk, obviously for the fully automated customer journey, but also in a hybrid version where a human advisor uses the same robo advisor as a supporting tool. You can achieve compliant risk profiling processes, and unified rules for the saving advise. For the retail clerk; no more fear of lacking knowledge – the computer says YES!
  4. Unbiased advice
    The increased focus from regulatory authorities is changing the game. MiFID 2, and authorization of advisors (both human and digital) are both developed to secure that the customers’ interests are the top priority of the financial institutions.

    A real robo advisor will always keep the customer in focus, picking the best available instruments to match her profile. The focus on unbiased advice is stronger than ever and a robo advisor is the easiest way to document that you truly provide independent, high value advisory services to your customers.
  5. Huge opportunities
    The potential investments from the retail saving market is huge, and practically untouched. Now is the time to target this massive group of customers, with both ordinary saving plans and not at least individual pension saving. The normal retail customer has limited knowledge about the financial markets and needs support from a trustworthy advisor service.

    A real robo advisor is the only way to scale and get your share of this large market, and at the same time keep your customers’ interests as the highest priority.

Quantfolio delivers customizable and out of the box robo advisory to banks and wealth managers.


Topics:advisorycomplianceroboautomationsavingMiFID IIrisk profilinginvestment advice