Give the ‘Robos’ a break
One thing you can always rely on in financial services is lots of people commenting on stuff, even if it’s not really got anything to do with them. So called ‘Robo advice’ is a popular bit of stuff at the moment. So, in keeping with the stereotype I’ve described, here’s my comment.
As with most things in life, some of the comments are better than others and that’s based on my own partial, subjective view. The general consensus seems to be that the big players have more of a chance to succeed than small advice firms launching their own offering. This is a good analysis of that particular issue and this is a good response from a technology (and young person’s) perspective.
At the same time the issue of attracting young people into financial planning, both as future planners and savers/investors, is gaining some momentum with people such as Adam Carolan doing good stuff.
There is a link made between younger people, with less money and IT minded being attracted to ‘low cost’, online solutions and ‘Robos’ being the perfect fit. I can see the logical thinking behind the link but the big issue is getting the clients. Abraham covers this well in his post, together with examples of cringeworthy adverts.
As far as I can see there are several obstacles any of these new Robos face:
- getting brand new clients costs a lot of money
- the Robos all seem to be ‘me too’
- people with money probably have an adviser
- most people don’t have a pot to piss in
- Hargreaves Lansdowne
That’s just background stuff though and a lead into my point.
It’s very easy and very cheap for a small advice firm to set up an online ‘Robo’ service these days. Most of the ones I’ve seen run on Parmenion and it’s a good bit of kit. Stick a sexy front end website on like this, or this or this (all running on Parmenion) and you’re away.
The arguments suggesting failure are very strong but what if they’re measuring success in the wrong way? What if they are not trying to be the new HL, not trying to make a fortune from online advice and the millennials (I don’t like that word) but are trying to do something else?
What if a small advice firm wants somewhere they can send new, younger clients that don’t have a lot of money right now to implement simple financial planning strategies they have provided? The sort of clients that will have money in the future, will have a relationship with you now, be in the saving habit and have access to a simple, potentially low cost option.
What if the bulk of a firm’s clients are middle aged with a fair amount of money but have kids starting out in the world that want to save a small amount; not enough to warrant full advice but a simple solution to get in the habit. The one that starts a relationship with your firm that can be built on in the future.
What if an advice firm wants to take on a young, trainee adviser and give them some clients of a similar age so that they can both develop as time goes by? What if the trainee can add a personal touch to the Robo clients just to keep in touch maybe and let them know they’re valued? That would be a good way to start learning and building client relationships.
So, if you don’t want to be the new HL but see a Robo as a logical extension of your firm for any of the above reasons, it could be an option for you. What if you can simply refer your own future clients, or your current clients’ kids to it and don’t need to spend any money marketing? What if you can plug in and play with something like Parmenion with very little up front and running costs?
This is where Robos could, in my opinion, be a great success.