The Stack Archive

Robo-advisory: Wealth managers need to step up their game to win

Tue 19 Jul 2016


frank-bertele-foto.256x256Frank Bertele, CEO at wealth intelligence platform NETZ, argues why wealth managers need to become more effective with lead generation and establish more sustainable, long-term client relationships to compete with the rise of low-cost, robo-advisors.

Robo-advisory is a huge step forward in terms of managing investments in a simple, cost-efficient and transparent way. Typically, rob-advisory platforms charge between 0.5-1% as a management fee, compared to traditional financial advisors which charge around 2-3%.

While historically people looked for a face-to-face relationship with their advisor, recent digital innovation means that customers are more mobile-centric. The financial crisis also came with bad press for traditional wealth managers and banks, so branding a robo-advisor as very low-cost, and transparent sends a good message to clients.

Screen Shot 2016-07-19 at 16.27.33But robo-advisors are not a threat to the entire wealth management market. They tend to target retail and affluent clients, which is why smaller financial advisory boutiques looking after these client segments will feel the pinch. Retail clients generally have a wealth of up to £50,000 in investable assets and require relatively simple product management. Large wealth managers looking after High Net Worth Individuals (HNWI) and Ultra High Net Worth Individuals (UHNW), however, are rarely threatened by the new market. Their clients need a tailored, bespoke service. If they’re investing millions, they need someone to talk to and engage with. This interaction can still be supported by technology, but it is important not to lose the human approach.

The limits on robo-advisors

Having said that, even in the retail/affluent client segment robo-advisors will never fully replace human financial advisors, in particular in times of uncertainty. A big stumbling block for robo-advisories is that they are not well placed to manage wealth in volatile markets, like we see right now. Robo-advisors are a cheap way of investing money if the market is rising – if a FTSE is gaining 10% every year and you invest in a very cheap way you can make 9.5% after the cost. However, times are more uncertain and there’s a lot of volatility in the market. With the Brexit shock last month, financial advisors were able to tell their clients to neutralise their position, maybe selling a few assets to lay off risk, but robo-advisors do not have this capacity. With considerable wealth, it is essential to have a human there who actually cares for your assets and manages your money more pro-actively.

Loyal clients lead to higher retention rates which make businesses more robust

Financial advisors which face competition from robo-advisors can win if they are able to step up their game. The main areas to improve are lead generation and ongoing client service. It is getting more and more important to identify and focus resources on high quality leads as opposed to wasting time with low value leads. A financial advisors’ Return on Investment (ROI) can be increased fivefold by simply refocusing lead generation and chasing high value leads.

The personal touch

Improving ongoing client service means building long-term client relationships by personalising the customer experience and making your clients feel special. According to recent figures, 65% of private banking clients say that customer experience is the most important element of a relationship, above cost and return.

However, only 29% of all advisors can actually deliver a personalised customer experience, demonstrating a huge disconnect between advisors and their clients. Loyal clients lead to higher retention rates which make businesses more robust and less vulnerable to adverse market dynamics.

Using wealth intelligence software can be a smarter way to connect and engage with clients. NETZ provides an end-to-end offering for financial advisors, which allows them to focus on high-quality clients and spend time more wisely, prioritising leads on estimated wealth and investment history. We have a huge database of wealthy individuals in the UK and our software constantly updates each profile, giving clients powerful insight into how best to connect with the client – perhaps they’re a football fan, have just sold their business, are running the marathon etc. It is these little ‘golden nugget’ data points that can make a real impact.

Empowerment in this way can help financial advisors compete against cheaper robo-advisory services. To win trust, human advisor relationships should offer the loyalty, and sustainability that a bot cannot.


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