Just back from a whistle-stop tour of the US, where I’ve been speaking to a number of firms that come under the far-reaching, and often incorrect, ‘robo-advice’ tagline.
Many great words of wisdom and insights from some of the brightest, most innovative individuals on the planet – from the smallest of the ‘digital disrupters’ to the largest ‘big brand’ players – all competing in the US automated investment advice space.
One company that particularly intrigues me is Jemstep.
Established as a registered investment adviser (RIA) in 2008, the firm developed a direct-to-consumer robo-advice offering in 2013, just like a number of firms are doing in the UK.
But – and here’s the rub – in the last year or so they’ve completely transitioned their business model, moving from a D2C automated investment proposition to focus on a B2B adviser-based technology proposition – Jemstep Adviser Pro.
There is definitely a learning or two in this change of strategy for any UK firm currently looking at the viability of the D2C robo-route.
You’ll quickly find:
• Customer acquisition costs are extremely high (read not sustainable).
• Without a trusted brand you’ll struggle.
• As bigger players enter the market, you’ll need to spend more to stand still, pushing out the date you can provide any sort of return to venture capital backers.
But what are the really important messages for advisory firms in the UK looking at the robo opportunity and wanting a slice of the action?
Well, if you think your new, shiny, proposition is innovative/disruptive, yet consists of the following, then I’m sorry but you’ll be hugely disappointed in the outcome, unless of course you’re running it as a ‘not for profit’ side-line, simply to keep a few existing customers happy.
• A strange name (you know the sort, a mash up of a couple of words to make a new word).
• A white label of another firm’s proposition, which to all intents and purposes is pretty much identical to every other firm that uses them – GIA, Isa, possibly a Sipp, some risk-rated ETF portfolios, low(ish) charges (but not as low as the multitude of existing D2C propositions which are already finding it hugely difficult – save a few – to build any sort of scale).
• A pretty inflexible technology – one pre-built process, take it or leave it.
Quite simply, if the sum total of your ‘proposition’ is to ‘slap a logo on a robo’, then you’re not bringing anything new to the party. No differentiation, no value proposition.
Yes, I accept these propositions will undoubtedly attract a small number of existing clients who can no longer afford ‘full fat’ advice fees, and perhaps even a few new clients attracted by the quirky name.
But let us face facts, you are unlikely to attract any significant volume of robo clients or sufficient assets to build a profitable business through a white label ‘me too’ proposition.