In the recent report Robo-Advisors: The Hype, the Reality and the Future, published on February 29th by Gartner, Chuck Thomas notes the difference between digitization and digitalization applied to Wealth Management services. Our vision on what the future of Wealth Management will be is that robo-advisors have a role, but not as relevant as hybrid advisory.
From the research, we can deduce that robo-advisors did disrupt the market but will not ultimately replace wealth managers and financial advisors, and we could not agree more. This because robo-advisors cannot meet all the needs of HNW (High Net Worth) and UHNW (Ultra-High Net Worth) individuals. They do not address current individualized and personalized aspects of wealth management, and will hardly do in the future. Robos provide an investment experience, not a wealth management experience; they just provide to Do-It-Yourself investors’ investment management tools on a cost-effective basis.
Investors Do not Want to Rely Only on Robo-advisors
Several studies state that only a minimal subset of investors are willing to rely completely on robo-advice, and they ask and value collaboration with financial advisors.
Will Then Robo-advice Disappear?
No! But it will become yet another tool for relationship managers. And it will be complemented by a set of digital collaboration tools enabling an hybrid experience (digital-human) to deliver personalized investment advice to more investors, with lower cost to serve. Wealth Management firms will use robo-advisors to augment, not replace client interaction.
From Automation to Digital Business Transformation
Reading the Gartner report, our takeaway is that there is a deep difference between digitization and digitalization. Robos are just digitization: conversion of analogue into digital form, while leveraging smart engines and analytics in conjunction with advisors (what we call the Hybrid Delivery) is indeed business transformational; it’s the future of wealth management, it’s digitalization; and it is changing the value curve of your business by introducing digital enablers.
Wealth Management Will be a People and Machine Business
Digitalization changes the business process design and execution. Wealth Management business is high intelligence work field with low variability; this is the sweet spot where people and machines need to coexist to deliver a new client experience. Robos are more positioned in the low intelligence work space, being as of today unable to interact with the uniqueness of each single investor.
High intelligence, low variability: there is a place for machine and people to coexist.