Chris Pitt explored the likely future and profitability of robo-advice at the Goodacre Securities Conference, considering current trends, lessons from the past and future forecasts. Watch the presentation on periscope: https://www.periscope.tv/w/1kvJpVyyoBLKE

1. Robo-advice
iress.com
Chris Pitt – Head of Market Analysis
7th October 2016
Is this the future?

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Robo-advice: Is this the future?
In its current, narrow focus?
Probably not

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Robo-advice: Is this the future?
Let’s broaden our definition to…
“The use of digital channels”
Any sales or advice process where the
consumer serves themselves to some extent

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Digital channels
Why are players so interested?
Reach new
segments
Enhance
service
Reduce
costs
Improve
compliance

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Robo 2.0
We’re already moving into a second phase of
robo / digital advice development
Players are
tackling the
barriers, like
finding cheaper
ways to acquire
clients
Going beyond the
narrow focused
US style online
investment
management
proposition
Even developing
intelligent
technology to
interpret client
emotions
(risk profiling)

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What is the market doing?
Market activity is significant and increasing
Project Innovate
Set up by the FCA to
encourage UK fintech growth
500+ requests
250+ supported
Many with a robo-advice model
More new start-up platforms
Investment Managers,
Life Cos & Banks

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Examples of market growth
0
2
4
6
2010
2011
2012
2013
2014
2015
2016
Growth of Betterment
AUM in billions of dollars
The Securities &
Exchange Commission
(SEC)
22%
increase in its members’
client numbers
Nutmeg
User numbers on track
2-3 years
until profitable
0
1
2
3
2016
2017
2018
2019
2020
Estimated growth of
U.S. robo-advisors
AUM in trillions of dollars
Source: Bloomberg via A.T. Kearney

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What is fuelling market growth?
Government
Pensions
Freedom
Baby-boomers
Rising
consumer
expectations
Pension
crisis
warnings
Millennials
Success of
online
banking
Advice
gap
Market
growth

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The naysayers are emerging

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The naysayers are emerging
“It will never catch on” - always a sign that
the winds of change are blowing strong
“The horse is here to stay
but the automobile is only a
novelty - a fad.”
President of the Michigan Savings Bank,
Adviser to Henry Ford’s lawyer, 1936
“The internet will soon go
spectacularly supernova
and in 1996 catastrophically
collapse”
Inventor of the Ethernet, 1995
• The automobile
• The telephone
• The internet
• The household computer
• The iPod, iPhone and iPad
• Facebook
• Online shopping
• Music streaming

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• Only time will tell
• Many technology initiatives do fail and timing can
be an issue
• Disruptors typically take a while to become well-
adopted and generate a profit
So, is robo-advice the future?

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• Several robo-advisers have already made a profit by
selling to bigger players and others are on track
• We are seeing promising levels of both supply and
demand in the robo space
• The direction of travel has got to see the application of
more technology, not less
• History tells us that those at the forefront of such change
do well and the laggards typically don’t survive
So, is robo-advice the future?

13. Thank you
iress.com
Email: chris.pitt@iress.co.uk
Mobile: 07920 135708
Chris Pitt
Head of Market Analysis
LinkedIn: Christopher Pitt
Twitter: @chrispitt11