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Post-pandemic, the only way is robo for advisers


Navigating their way through a pandemic both personally and on behalf of clients, has served to further increase the burden on an already stretched financial advice industry. It’s hard to blame the thousands of advisers choosing to exit and seek careers elsewhere when you combine the increasing compliance requirements and nuances of the Royal Commission report. Despite the mass exodus, the advice industry is actually becoming more competitive, rather than less, but not in the way most would think.

The additional compliance, education and reporting requirements arising from the Royal Commission have deemed it near impossible to advice investors with lower balances. In many cases advisers are writing to their clients indicating they simply cannot help them anymore. An unfortunate piece of collateral damage. This means more advisers are chasing the same HNW clients. Yet the need and demand for advice from those with smaller balances couldn’t have been better highlighted then through the $42 billion withdrawn from superannuation under the COVID-19 early release program. It’s clear the majority of this $42 billion has come from industry super funds, not retail funds, which suggests that perhaps the lack of access to personal advice from these large groups may have accelerated the program.

How does the advice industry make advice more accessible?

  • Australians are exceedingly slow at adopting technology. You only needed to visit a restaurant during Stage Two restrictions to see the masses struggling with something as simple as a QR code. Yet after a slow start, the Australian robo-advice industry is gathering steam, behind the number one financial app provider, RAIZ.

    RAIZ has blazed a trail in the ‘risk-profile’ investment space and in some ways its success has made Australians more comfortable with the concept of outsourcing to a robot.

    The result has been growing interest from financial advisers. Many advisers have sought to create their own robo advice models, some with limited success, others simple further complicating already stressed business models. There is little doubt advisers around the world, at least the entrepreneurial ones, are seeing the opportunity in the ‘mass unadvised’, the biggest question, though, is how can they be serviced properly and profitably. It’s become clear that the only way is robo.

    Beleaguered wealth manager AMP Ltd (ASX:AMP) seemed to be at the head of the pack when it entered a much lauded partnership to deliver technology enabled financial advice via its platform ‘Goals360’. This was a solid start for a billion-dollar financial advice company seeking to replace its advisery network at a low cost, but its not where the industry is heading.

    After a slow start, Quantifeed, a growing wealthtech firm with institutional and banking clients across Asia ranging from Saxo Bank to DBS, appears to be gathering steam.

    Graeme Brant, head of strategic partnerships’ at Quantifeed says: “To meet clients’ growing expectations of wealth management, financial institutions are looking for ways to provide planning and advisery services with greater efficiency, flexibility and scale. In the past three years, we’ve seen disruptive technologies and evolving consumer needs reshaping the wealth management industry.

    ” The application of robo-advisers has proven to be an inevitable trend in a digital-first environment with the launch of several robo-advisery platforms by financial institutions across the Asian region in 2019. DBS launched Asia’s first discretionary robo solution – digiPortfolio – in Singapore. It is a first-of-its-kind portfolio solution for beginner investors and for the first time it makes available portfolio of SGX-listed ETFs to investors in Singapore. China CITIC Bank International launched Robo 360, Hong Kong’s first bank-backed robo-adviser for retail investors, which provides easy access to tailored diversified multi-asset portfolios with low minimum investment. Cathay United Bank introduced Taiwan’s first theme-based investment solution for retail investors powered by its award-winning robo platform ‘Cathay Robo’. The new solution came after the successful launch of its goals-based investment solution on the robo platform.”

    Brant says that it’s not just the banks. “Everbright Sun Hung Kai, one of the major brokerage firms in Hong Kong also launched a theme-based robo solution – EBSHK Direct AI-Portfolio Investing Platform. Whilst many of them were market firsts, we are seeing more banks, security brokers and wealth managers gearing up to launch scalable, affordable and customer-centric investment solutions. It has become a real game-changer in the financial industry.”

    Brant further adds: “Today, mass affluent in major Southeast Asian markets constitutes only 10% of the population in the region. The number is set to double by 2030, according to a BCG report. By 2030, two-thirds of the global middle class will be living in Asia. An increasing number of customers are willing to pay for financial advice, but wealth management services and solutions for the longest time have been available only to a limited wealth segment.

    “But everyone has wealth management needs, and wealthtech is really revolutionising the wealth management industry by ensuring professionally managed investment products are available to the mass affluent and retail investors.

    ” We are seeing more financial institutions reinventing themselves as digital leaders – especially during the COVID-19 challenge.  The crisis has fast-tracked the need for digital wealth management solutions across the globe. The digital wealth platforms we launched in Asia have demonstrated their efficiency in maintaining an ongoing connection between the financial institution and their mass retail customer base. 

    “From broad market information and economic cycles to personalised notifications on portfolio performance and rebalance alerts, the timely and consistent touchpoints enable customers to keep track of their investments and have a peace of mind.

    “More importantly, such a connection at scale is not subject to the capacity of call centres. It allows customers to review and manage their wealth at the time best suits them, and not always during business hours. An added benefit of being part of a digital wealth platform is having a diversified investment portfolio.

    “In Australia, a great many SMSF trustees and members are self-directed. Many have been overweight banks due to the attraction of fully franked dividends. Their portfolios have taken a big hit over the past weeks as some banks have deferred or reduced dividends. A diversified portfolio provided via a digital platform would reduce much of this stress and may well have performed better than one concentrated on banks. 

    He notes “A digital wealth offering also enables financial advisers to stay connected to a broader base of customers without the need of a high touch service. This is particularly important as clients at all asset levels are in dire need of advice when markets are falling.  The addition of a digital capability to a wealth management operation to service the masses creates a new and high growth potential business stream. This complements the traditional face-to-face operations associated with higher value clients.”

    It seems the group have been the first to identify that Australian financial advisers aren’t all the same, and that what happens overseas doesn’t necessarily work here. Rather than pigeon holding financial advisers into a single, risk-profile based option, the group offers the one thing demanded by the industry; choice.

    The offer is at its core, simple, advisers can access a white labelled, robo-advice solution, that allows them to offer three different types of ongoing investment advice:

    • Goals-based Investing – Create wealth plans to achieve financial goals
    • Risk-based Investing – Build a core portfolio for long term wealth accumulation
    • Theme-based Investing – Invest in topical investment themes

    The existence of a theme-based option is a key differentiator, as it allows advisers and clients to make real connections on investment strategies, increasing engagement along the way. Importantly, the Quantifeed solution offers all the back-office support you would expect from a more expensive platform, administration, implementation, data feeds and most importantly, client reporting via a dedicated, mobile application.

    The times are changing

    The flood of financial advisers out of the large banks and financial institutions may be a good thing in the long-run, but the independent advice world is very different. Compliance pressures are felt directly and advisers are faced with an unstructured career after spending years under surveillance.

     It’s for this reason the Quantifeed solution is best suited to emerging dealer groups and larger networks of advisers, seeking to expand the reach of financial advice.

    As Brant says “From the established Robo-advisers in other markets, we can see that a digital solution offers greater efficiency, flexibility and scale. This enables wealth managers to scale up their businesses by reaching out to a broader customer base, and in turn adding new source of revenue and better managing business costs.”

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