The online investment assistant is the most important member of the investing team, handling everything from tracking one’s portfolio to helping them buy and sell assets. It is a relationship the investor needs to be happy with.
Robo-advisors – automated algorithms which suggest a basket of low-cost exchange-traded funds (ETFs) based the investor’s risk tolerance – have been quite popular over the last year. “Robo-advisor” is certainly a buzzword.
A Growing Market
There are 64 robo-advisors in Europe, and it seems new ones are appearing almost daily. Robo-advisors are providing access to financial services by delivering more convenient and affordable solutions.
Customers now have the opportunity to get professional, automated investment advice that is less expensive, easily accessible, through a beautiful, simple interaction. Most robo-advisors combine an intuitive and visually appealing online interface with a streamlined account onboarding and easy-to-understand performance tracking.
Users just need to define their goals and risk tolerance and the algorithm builds a basic ETF portfolio with systematic rebalancing option. Robo-advisors have pretty much the same fees, ranging from 0.1%-0.8% of the total amount invested.
It is really the perfect solution for people who do not want to pay ridiculous fees for basic financial advice, do not have time for analysis and portfolio rebalancing, and are intimidated by building a portfolio completely on their own. But there is a small problem.
Still Not Enough
Customers expect personalised and efficient assistance to manage their money, not just “heartless” robots using their money to buy ETFs, as they can perfectly do this on their own and, even cheaper, via online brokers.
But online brokers are not a perfect solution either, as investing through them requires an incredible amount of time to collect asset information from various websites, investment knowledge to decide which stocks or ETFs to add, and courage to explore the complex and user-unfriendly interfaces.
Like the equivalent of a GPS navigation device, a digital assistant should help map out a better route, but still be fully flexible and manageable, allowing a change in asset allocation, risk levels and adding stocks that the investor picks.
There are several investment services adopting this strategy in the UK, France and Switzerland and are offering options to personalise investment portfolios, while at the same time providing meaningful assistance in the process. These companies have already realised that one-size-fits-all portfolios actually do not fit all.
It is not about features – everybody is doing features – it is about feeling. Money is an emotional topic, and an online investment assistant has to resonate on a deeper level with customers, giving them the feeling that they are in control.
While providing a unique, cutting-edge experience, robo-advisors need to show empathy, as they clients need personalised gains, tailored to their financial goals and individual needs.
To enter the rather crowded market successfully, robo-advisors will need to go beyond simple ETF-based portfolios, allowing customers to personalise their investments based on their market views and individual company preferences.