Robo-advisory frequently makes headlines for leading innovation in the wealth management industry. Trends in the space—and regulators’ reactions—differ across growth markets, but one thing is certain: the sector is growing.
But not all robo-advisors are created equal. They differ significantly in sophistication, as well as in their adoption of active versus passive strategies. Steven Seow, Mercer’s Head of Wealth Management in Asia, shares seven critical success factors for best-in-class robo-advisors, whether for institutional investors or high-net-worth individuals.
"The back-end technology infrastructure will allow huge volume of trades to be carried out in a tiny, efficient manner and in a cost-effective manner. And that’s very important because Robo advisor can only work when you deliver a low-cost value proposition to the client" - Steven Seow, Head of Wealth Management, Asia
The Seven Critical Factors for A Best-in-Class Robo Advisor
- A user-friendly interface, be it through an app or browser portal.
- A robust back-end infrastructure that allows a huge volume of trades to be carried out in a time- and cost-efficient manner.
- Investment proposition that includes forward-looking capital assumptions and strategic asset allocation.
- Fund selection process that includes both passive and active strategies.
- Machine learning capabilities, using data mining to tailor individual recommendations to investors.
- Gamification, which studies have shown to enrich the client experience and increase client engagement.
- Aggregate buying power, resulting in better pricing from the fund manager and cost savings for the end investor.