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Robo-advice 2.0 - the 'next generation'

How can established financial services brands win the ‘Robot Wars’ being waged for the hearts and minds (and wallets) of a generation of investors? (While ensuring the robots always prioritise the best interests of their human customers?) 

Robo-advice is on the march. It’s making ever-increasing inroads into the retail investment market. And it’s achieving growing volumes of AuM that were previously, and exclusively, managed through ‘traditional’ investment advice channels. Until recently, the robo-advice providers were predominantly challenger newcomers. But their disruptive innovations have not gone unnoticed by established players. Now it’s time for the older brands to ‘strike back’, with ‘Robo-advice 2.0’. How should they approach this opportunity? What should be their guiding principles? 

There has always been some nervousness about the more complex aspects of human life being performed by robots. Classic sci-fi fans will recall that, back in 1942, Isaac Asimov first laid down his ‘Three Laws of Robotics’. They were designed to govern the fundamental behaviour of robots.  In short form, they state that: 

  1. A robot may not injure a human being.
  2. A robot must obey the orders given to it by a human being.
  3. A robot must protect its existence. 

These principles became a consistent theme in Asimov’s descriptions of a futuristic society. And they have grown in relevance ever since, as the reality of robot involvement in mainstream human life becomes commonplace. 

Now, imagine that Asimov had focused on the Financial Services sector of his society. Logically, he would have built on the core values of human precedence over robots. So he might well have devised principles for ‘robotic’ interventions in humans’ choice and management of their investments. What would this sub-set of robot law contain? The Three Laws of Robo-advice would state that: 

  1. A robo-advisor’s offer must be relevant and meaningful to human needs.
  2. A robo-advisor must employ a cost structure that is transparent and self-evident.
  3. A robo-advisor must operate with simplicity, being straightforward and accessible. 

It’s striking that, when you look at these laws, you see there is nothing ‘futuristic’. A relevant and meaningful offer, a transparent cost structure and a simple approach are – or ought to be – the underlying values of any financial services proposition. With the next generation of robo-advice, the Big Opportunity for established brands launching their own robo-offer is not to embrace technology for its own sake. Quite the opposite, technology should be the servant of robo-advice propositions that are personal to the real life needs and financial aspirations of human customers. 

The robotic element should be restricted to underlying tasks that can be carried out more efficiently by machines. The real emphasis must be on the robo-advice proposition and content, and on the factors that make it a rewarding experience for the human user. 

So in this case, we would shorten the Three Laws to a single mantra: ‘Robo-advice 2.0 - real, and really clear, investment solutions that are relevant to real people’.  



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