Here follows a bridged excerpt from my participation in a panel about roboadvisory, during the Ascosim Conference in Milan, on October 28th, 2015.
ROBOADVISORY IS INEVITABLE
Question: Which models are developing in the banking channels? Are banks considering this trend, or are they overlooking it?
My comment: I’ll try to consolidate what has been said until now, by saying that the main point is to combine a roboadvisory process with the more human and emotional part of the process.
It may seem trivial, but the truth is that technology is an enabler for getting there, not an answer. For instance, we realized that MoneyFarm is more used by Gen-Xers and baby boomers than millennials. But the point is, the customer are becoming digital faster than expected and banks have understood the existence of a range of customers feeling the need for a digital engagement.
In such a market like Italy, that is especially driven by human interaction, a technology-only answer is going to be a niche; the duty of technology is to enable the synergy between human and digital aspects – the so called hybrid delivery. I do believe that this approach will succeed worldwide.
This is why we call it digital wealth experience, the capability of creating digital experience for an investor, where the process can start digitally and develop on a human channel also, or, vice versa, can be a mainly human relationships that gains technological tools as it unravels. Time changes people, however; I wasn’t interested in a digital interaction twenty years ago. Today I switched my provider because I could no longer stand to have to place a call to ask for a report, or to write an email to get any kind of answer… time has changed and today I want a report to come when I want to, not when the provider does.
Big players are moving in this segment at the moment with big internal investments. Role of technology and software providers like us is to scale these novelties towards lower levels of investment. The winners in this sector will be the ones that will be able to create an “AirBnb like” customer experience in the digital wealth advisory landscape.
As we said the human factor is still the core of the relationship in Italy, where a true hybrid advisory market doesn’t exist yet (how many banks actually allow you to choose a portfolio online and, by clicking a button, talk with a live advisor to develop a relationship?) and sometimes there is the fear of disintermediating the private banker, or the financial advisor. But the digital customers will become the majority soon, and not having an hybrid approach will limit your business.
Just let me remind you how Kodak got busted. They invented the digital camera, but were afraid that creating a new digital division would have disrupted their core business and created conflict between the business divisions within the company. The digital camera disruption happened anyway and they disappeared from the market! The same will happen for digital wealth, the evolution of this model will simply happen no matter what you do. And you will have to cope with such a change.
CHANGING BUYING BEHAVIORS
Question: I can’t think of building a virtualized call center; I say hybrid and mean that the investment choice engine is robotized, while the human relationship goes by an advisor or promoter. It’ll be hard in Italy for a totally non-physical market to take off, because automating a process of definition of people’s needs is likely to create a simplified matrix of cells, and a a customer I won’t like to be simply put inside a cell in an automated way.
My comment: The point is, the digital buying behaviors for the new generations are already well developed and are completely different from the previous generations. New generations use Booking.com for instance to book and holiday. Who would have said that 15 years go ? and when do millennials begin? It depends on what you read but, if you agree with 1982 as the starting point, there are millennials that are soon to inherit from a baby boomer and is going to be 40 in a relatively short time. It is said that millennials like cash more than other forms of money, but when they’ll inherit some hundreds of thousands euro, rest assured that they’ll like to invest too.
But they will not expect the same investment experience that their parents got, the engagement mode that will have to change. If there is a digital-only experience, I agree that we can loose the last mile, maybe the most profitable and rewarding for the investor; but, without a digital engagement, you risk not even getting there. Many financial networks are going very well because the collect a lot of money from legacy customers, but I’m not sure about how many new customers they are onboarding today. I guess prospects are more likely to go somewhere else to get advisory, if they will not perceive the investment experience they are looking for. Brands are not that much relevant in the digital world as they were 20 years ago.