13 December 2017
Diederick Van Thiel

Digital Behavioural Science

Diederick Van Thiel - AdviceGames Group of Companies

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Do or die: Robo-advice & Psychometry What drives wealth management winners in 2020?

27 December 2016  |  8178 views  |  0

The wealth management challenge

The high net worth individual population globally grew to 15.36 million people in 2015. The global assets under management also grew to $ 58.7 trillion. Private banks globally however  experience a disruptive change in their markets. Older customers are fading away, money is being transferred to their children who are willing non-traditional modern wealth management services.  Also, internet millionaires have been qualifying over the past years at a much younger age as potential customers. The younger generations demand fundamentally new interactive customer experiences. In my paper “Explaining the customer experience of digital advice” I give deeper insight in the working of these new customer experiences. But, on top of that, cost income ratio’s, which currently are between 70% and 100% will have to drop drastically to stay competitive. Especially the manual costs in the traditional private banking business models face opportunity for disruption.

Priorities

Based on my background in banking, I know fees on assets under management drive the traditional wealth management business. Priority number one therefore is to grow the assets under management in the younger generations. Mobile and automated customer transaction and status experiences at low cost play a crucial part in that. Hybrid and robo-advice offer a perfect solution for traditional wealth managers. But also growth in non-traditional customer segments like young entrepreneurs and internet-millionaires has to be top priority in private banking growth strategies. But how can you take this off?

Robo-strategy

To do so, wealth managers can follow a build or buy robo-strategy. Vanguard and Schwab for example introduced their own free hybrid robo - human-service in addition to their traditional offline advice. They are currently growing faster than the internet-only robo-advisors. White label robo-advice modules for customized robo-services, offered by companies like Betterment, FutureAdvisor and AdviceRobo, are also a solution. Fidelity for example offers robo-advice to customers making use of the Betterment platform, US Bank does the same using the Future-advisor platform and leading European banks start working with AdviceRobo. All these robo advice solutions provide solutions that engage the younger HNWI’s and reduce cost income ratio’s big time.

Psychometric scoring driven services 

For service development within these robo-advice environments, new sustainable business models need to be considered. Younger generations are purposeful and want business to shift their focus. Psychometric scoring offers a solution for this. Psychometric scoring covers virtually all statistical methods that are useful for the behavioral classification of customer segments. In the future we will have more personal data then ever before thanks to improved instrumentation, like brain scanning and genome sequencing, as well as the growth of the internet and computing power. Data collection now surpasses our ability to harvest and interpret its complexity. It is expected that wealth management will grow around the analysis of data, both commercial and scientific. In my book “Riding the waves, the future of banking”, I describe how the role of wealth managers will therefore fundamentally change from profit driven relation agents into purpose driven service managers that explain and guide their customers in the potential the robo-advisor un-taps. Psychometrics will help wealth managers to build their future proof business models.  It builds bridges between the central purposes and behaviours of the target customers and the wealth management brand and service offering. Robo-advice and psychometrics therefore are in my opinion the core ingredients of wealth management winners in 2020. 

 

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As CEO of AdviceGames and AdviceRobo it is my responsibility to create value and scale these companies globally.

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