Zurich – The robo-advisory model is at a tipping point with all current players needing further development if the robo concept is to prove long-lasting. Without further refinement on the part of the individual robo-advisors themselves, a substantial portion of current providers will have difficulties succeeding in the long-term.
This is one of the main findings of the report “Leading Robo-Advisors 2016 – Benchmarking the current automated investment landscape and mapping the road ahead“ for which the Swiss research company MyPrivateBanking Research analyzed and ranked 30 leading robo-advisors worldwide.
No end-to-end consistent level of excellence yet
In their global benchmarking of robo-advisor platforms, the MyPrivateBanking report identifies plenty of examples of good practice at the level of individual functions. However, in the researchers’ view, no providers are yet coming close to offering an end-to-end consistent level of excellence. “We see that most robo-advisors are good at some features, but at the same time missing out completely on other important ones”, say Francis Groves, senior analyst of MyPrivateBanking Research. “While this was tolerated by clients at the start of the robo-advisor breakthrough, they now demand a top-performance throughout the full process, from comprehensively explaining the services to superior portfolio reporting.”
Schwab intelligent Portfolios, Indexa Capital and Nutmeg top ranked robo-advisors
MyPrivateBanking’s ranking of 30 robo-advisors from 15 countries awarded the highest scores to the these three platforms:
- Schwab Intelligent Portfolios (USA) – exhibiting great strengths in the key areas of product and process information and client assessment plus user experience (43 points out of 60).
- Indexa Capital (Spain) – a good ‘all-rounder’ with a solid performance in all areas (42 points).
- Nutmeg (UK) – Another example of excellent product and process information coupled with being one of the top three providers of investment knowledge and education (42 points).
Most robo-advisors fail to offer a user friendly performance across the full process and all channels
However, with more than a third of the evaluated firms achieving less than half of the possible points, and the highest scoring robo-advisor scoring slightly less than 75% of the maximum available points, MyPrivateBanking sees considerable room for improvement. In particular the survey identified that there are too many gaps in most robo-advisors’ onboarding processes to guarantee a steady stream of new clients.
MyPrivateBanking’s evaluation covered 43 different criteria and assessed the performance overall including for the robo-advisors’ websites, mobile apps and social media channels. Some of the more troubling key research findings are:
- None of the platforms evaluated have yet developed the robo-advisory model of client recruitment to its full potential, with even the best current players leaving out at least one essential component. For example, analysts found that advisors provided either good information about the product and process OR good knowledge content but rarely both.
- Client assessment, the highest profile component of robo-advisor onboarding, is generally falling well below a sufficiently rigorous standard. Less than 50% of the evaluated advisors failed to explain the purpose of their questions and only 53% included a comprehensive check on a prospective investor’s attitude toward risk.
- A high proportion of the robo-advisors, 23 per cent, are abdicating from the any responsibility for sustaining their own clients’ ongoing investing ‘career’ by the provision of relevant, easily digestible education and knowledge or even, in some cases, providing dedicated social media.
In respect to robo-advisors offered by well-established institutions the MyPrivateBanking analysts identified a tendency of such actors to enter the robo-advisor space for the first time by creating robo mini-sites. These are characterized as one or two page websites, which may or may not be embedded in the institution’s overall web presence, that are clearly not designed to be revisited by signed-up clients. In MyPrivateBanking ‘s view this is a kind of robo-advisory sub-species that may assist with rapid client onboarding but which does not, on its own, do a lot to foster enduring client-advisor relationships. “We foresee the need for leading institutions to be more radical and wholehearted in their automated investment initiatives in the next few years, even if this means starting over again with a second robo-advisor to replace their first.”
Only robo-advisors constantly pushing ahead for superior client experience will survive
“The pioneer years of robo-advisors have come to the end and the market will separate the wheat from the chaff“, stresses Francis Groves. „ Too many automated investment services target the same, growing – but still not sufficient – client segment to nurture all or most of them. Too few of the automated investment services see their platform through the eyes of a first time user, while many are losing sight of the need for sustaining a customer experience that will – ideally – last for years.”
In this report, MyPrivateBanking makes a series of recommendations on the basis of our benchmarking evaluation, among them:
- Aiming for transparency is the best policy, especially when presenting the robo-advisor’s pricing and product and process information.
- Automated investment platforms need to be subjected to rigorous user experience testing. Looking good is not enough – equally, content must be in-depth.
- Robo-advisors risk side-lining themselves if they don’t recognize that clients need financial plans as well as investment portfolios. At least a basic financial planning offer should be considered for inclusion as part of the robo value proposition.
About the report:
The report “Leading Robo-Advisors 2016 – Benchmarking the current automated investment landscape and mapping the road ahead“ analyzes in detail the strengths and weaknesses of the website, mobile and social media offerings of 30 leading robo-advisor worldwide according to 43 criteria under the following headline topics: user-friendliness, the quality of the content; contact and interactivity, social media integration and as well mobile accessibility and availability. In addition to our overall diagnosis of the state of health of the robo-advisor model and providing individual profiles for the 30 platforms evaluated, this report includes 10 best practices and a detailed summary of all findings and as well a detailed strategic analysis of the current level of robo-advisor development and the future opportunities and threats. More info.
Americas: Alpha Architects, Betterment, BMO SmartFolio, Capital One Investing, Connect Invest, FidelityGo, Honest Dollar, RBC Investor Gateway, Rosecap, Schwab Intelligent Portfolios, Vérios investmentos, Wealthbar, Wealthfront.
Europe: Indexa Capital, Investify, KeyPrivate, Money on Toast, MoneyFarm, NetWealth, Nutmeg, Pritle, Scalable Capital, True Wealth, Vaamo, VZ Vermoegenszentrum, Wealth Horizon, WeSave.
Asia-Pacific/Africa: Mizuho Bank Smart Folio, QuietGrowth, Sygnia. (MPB/mc/hfu)
About MyPrivateBanking Research:
Established in 2009 in Switzerland, MyPrivateBanking Research specializes in research and analysis on how financial services firms should develop their websites, social media presence and mobile apps to best serve existing customers and win new clients globally. MyPrivateBanking Research offers its insights in comprehensive reports as well as customized research, workshops and presentations. For further information please click here.