Robo-ing in America
Musings from a UK robo-advisor at In|Vest in New York. Here are our 5 key takeaways.
Last week, we flew off to In|Vest in New York to talk about Fountain’s upcoming launch and speak on a panel about the future of robo. As a UK robo advisor, this was a chance to jump into the advice and investing landscape in the USA (and pick up a few snippets along the way).
FinTech geeks… Are you ready? Here are our top 5 takeaways.
1. Robo remains young
Despite the rapid growth of automated investing (ie. Betterment, Acorns, Wealthfront), the party is just getting started. The need to modernize an outdated industry and accommodate new consumer demands is everywhere. Industry giants are transitioning slowly but surely into more tech driven solutions, whilst newbies are looking to capture different niches and under-addressed needs.
Here’s a fun fact. According to Juniper, digital platforms accounted for $330bln in AUM in 2017 and that is expected to skyrocket twelvefold by 2022 (link). Yup, it’s a big pie.
From automated pension advice to faith based investing to digital custodians, it will take a smorgasbord of services for this market to reach its full potential. The industry is maturing but it is certainly not saturated, we’re only a minute or two into the first half of robo.
2. Robo island can be a lonely place
This was probably my favourite talk by Mike Sha, CEO of SigFig (link).
We’re accustomed to treating robo-advisory as a stand alone service and desperately try to draw new customers to “our island”. But like in real life — It is always difficult to get people to visit a remote island.
Only the die hard travellers ever really go for it, never the masses.
Cross pollination is key and robo-advisory needs to be part of a larger family of services. In other words: build bridges, roads and airports that connect your exotic robo-island to other cities and islands. Simply put, make your island less remote. If you are on a mission to simplify investing for millennials, perhaps it’s time to build bridges into their checkings and savings accounts for example.
3. Americans are more helpful — Are we missing something in the UK ?
In Europe, we easily forget about the perks of public healthcare, workplace pensions, and subsidized education.
This is not the case in America and helpful advisors are using these “pain points”to draw customers closer.
A retiree may be worried about the costs of healthcare and the burden it poses on their family. As a result, advisors are including health insurance into customer conversations, making for more robust pension planning.
The average american needs to take more initiative to manage their retirement (ie. 401K) and will rely on their advisor (human or robo) to offer much needed guidance. In Europe, where workplace pensions are common, people often passively contribute towards a pension and less urgently need assistance unless they are nearing retirement or approaching new thresholds of complexity.
Finally, the steeper costs of higher-education leaves many young professionals — highly skilled, ambitious and future high earners — with large debt. If an advisor wants to poach you when you’re young, he’ll have to help you manage your debt first.
Healthcare, pensions and college debt. Three material pain points that advisors are using to engage with customers and better their financial situation. In the UK, I see fewer areas where unaddressed investors need “urgent” assistance that will ultimately accelerate their investing.
Perhaps I’m living in a tunnel so please educate me in the comments below if you have ideas.
4. The hard thing about hard things
Financial services is an old and clunky industry. Giving it a makeover is no small task. And I appreciated people’s candour on this topic. Many speakers were open about the difficulties of being agile in a large corporate, with younger startups admitting that the barriers to entry remain high and difficult to manage with limited resources.
This was all said in a positive light, as if nobody would have it any other way and fully subscribing to the idea that if it were easy, it would be done already.
I can confidently say that this attitude is also present in the United Kingdom’s FinTech ecosystem.
5. Your core mission matters — but add a few things along the way.
Acorn’s CEO, Noah Kerner, was glowing with enthusiasm about the future of simplified investing. Safe to say, they’re only getting started.
They are taking micro-investing to new heights with useful and novel products. For example, a bank account with cash back incentives that can be automatically reinvested. Less like cash back, more like “invest back”. More importantly, it was encouraging to see one of the original robo-advisors evolve beyond their hallmark product whilst still owning its core belief — From small acorns, mighty oaks will grow. I’m curious to see how more mature robos will evolve, in the UK and elsewhere, as they search for their next wave of growth.
And that’s all folks. New York, it’s been fun. Back to London and jumping back into it, the future of wealth awaits.
Dann Bibas is the co-founder at Fountain, a digital wealth manager leveraging novel technology to create personalised investment experiences.
