New tendencies in Robo Advisory space

In case you haven’t yet learned about the new robo financial advisor businesses (or digital counselors ), this should be the year you do. They are fast growing and gaining ample assets.

Based on a study by Corporate Penetration, from April 2014 to July 2015, the top robo-advisors — or automated investment services as many choose to be called — went from $115 billion to $21 billion assets under management

With these new companies bringing more investors and with all the business continuing to mature, there will undoubtedly be many changes that affect the robo-advisory market. Here’s that which we are prone to find in 2016 and beyond.

Legacy Firms Go Robo
As the robo-advisor industry grows it will continue to attract the attention of financial services companies that are established. These corporations desire to offer what their clients need — money management that is easy — while at precisely the same time bringing more funds to manage. Right now they’re losing dollars to the upstart robo-advisor companies under direction. Since the amount of money under management determines how much money firms can make, they will pay attention to the reason why they are losing out on new investment dollars.

Just previously year, Fidelity Investments, Charles Schwab Corp. and The Vanguard Group have either created their own digital services unit or partnered with an existing pureplay robo business.. You’re able to get the other large companies to join the trend.

Increased Kinds of Investment Options
They work by ensuring you’ve got the right asset allocation for your targets using index funds. A number of them subsequently additionally use tax loss harvesting as ways to improve yields.

Beyond their own original assumption of money management that is digital, robo-advisors will start offering options as a means to obtain a competitive advantage in a increasingly crowded market. You could possibly end up seeing matters such as portfolios according to different analytical strategies using beta that is intelligent and technical analysis. Businesses will use these investing alternatives in an attempt to make their services more appealing to those that desire to overcome and time the market but still do not want to manage their own portfolio.

The Flip Side
One trend that will probably coincide with robo-advisors’ evolution is lousy investment options. We have to be prepared to see existing companies or upstarts begin offering robo services at extremely high fees. We will also probably see this paired with awful investment choices which have fine print that is concealed and additional high fees that’ll lock customers into contracts

It’s no different with index funds that bill more than 10% for the same thing you can get for 006%.. Such funds continue to be in business because people get demanded by salespeople that are competitive to put their money there or they do not take the time to comprehend what makes a great investment. The sort of companies that run these funds may achieve success by trumpeting a trend and preying on consumers that are uneducated.

Mergers, Acquisitions and Closings

Depending on at, it’s projected there are about 200 robo-advisor companies out there, many which don’t have a lot of assets under management. Together with the area this packed, expect to find acquisitions closes and mergers. The rate of employee turnover in the marketplace might be fast given that robo-advisors tend to have smaller borders as a result of lower fees they charge. And when it comes to survival of the fittest, it’ll probably be problematic for independent robo-advisor to gain enough traction to make it on their own..

The consolidation is already occurring — BlackRock Inc. recently purchased Future Counselor and Northwestern Mutual Life Insurance purchased upstart online money supervisor LearnVest.

More Options for Private Guidance
Robo-advisors work nicely without important life changes on the horizon for clients and for individuals who don’t need added services such as estate planning. Robos choose all the stress out of obtaining the right asset allocation and investments; they are also maintained by them without an excessive amount of cost.

Nevertheless, as investors reach stages in their life where they want more advice that is personalized to work through choices — buying a property, saving for college or getting ready to retire — they’ll want access to more than simply a computer program

That is really where the robo-advisor firms will start to incorporate human counselors to help with matters that are more complicated. This may mean an increased fee to obtain a person that is dedicated adviser, or it can mean that one is paid for by customers as guidance that is more involved is needed. The natural evolution of the market’s can lead to conventional human advisors accentuating their practice by pairing up having a while label robo-advisor to offer the automated investment services ; premium services which demand a dedicated financial advisor may still be offered when needed
Robo-advisors are here to remain, but the services will continue to evolve to generally meet the demands of younger investors over the course of their life. For when they may be needed and more investment options, this includes services that are increased. With an increase in competition, you are going to see these matters become a large part of the mixture.

The Great FinTech Trends – Robo Advisor Race

The Fantastic FinTech Robo Advisor Race

Possibly no other sub sector of the arena that was fintech has received as the robo advisors as institutional and retail interest. The company of financial planning and personal investment impacts substantial pools of capital and large investor sections. Innovation in the investment technology space is creating a race that is furious among insurance companies and startups, brokerages, wealth management businesses to serve a changing and evolving account base. .. But you will find many factors to consider as competition heats up
Who Are the Robo Advisors
By now, the robo advisors are familiar to almost all fintech watchers. Their services include automated portfolio preparation, automatic asset allocation, risk assessments that are on-line, account re reconciliation and other digital tools. Well known players comprise Theme, Wealthfront, Betterment and Folio , among others.

Generally, robo advisors allow more folks, who otherwise may not be able meet account minimums or to invest with confidence, to enter the market in a passive way. Conventional wealth management companies and financial advisers cost 1% of higher or AUM. Robo advisors fulfill a need for more economic, automated and digital preparation tools which might be preferred by younger, digital informed investors or those who want more privacy and control over their portfolio.

Nonetheless, it’s not other younger generations and merely the Millennials who favor digital investment tools. Firms have figured out this and are starting to compete with the robo advisors.
For on-line brokers, robo advising feels like a natural extension of what was already an electronic service. Stock brokers went through a substantial transformation in the late nineties during the first dot com boom and most, or even all, became online agents. More fascinating is the degree of interest in robo advisors from very traditional players such as insurance companies, asset managers and wealth management businesses. Buy, these firms are aggressively moving to assemble and associate with robo technologies

Below is an inventory of some of the announced mixes and launches within the last two years:

* Northwest Mutual acquiring Learnvest

* BlackRock acquiring Future Advisor

* Invesco obtaining Jemstep

* Vanguard launching Private Adviser Services

* Charles Schwab found Scwab Intelligent Portfolios

* Fidelity Investments launching Fidelity Go

* E*Trade launching Adaptive Portfolio

Challenges and Concerns

The decision for traditional financial institutions to compete with robo advising is, on the one hand, practically apparent, while requiring some complicated factors. Lower fees and the digital transformation changing the financial services sector has become an universal subject. The main tactical dilemma for conventional players who enter robo advising seems to function as impact to their current business
A vexing dilemma for those players with an incredibly big AUM base is the potential cannibalization of their fee revenues. If these players switch to a robo advisor model and charge lower fees for the same AUM, they will, essentially, have to attract a larger AUM base to make precisely the same fees as before, while at the same time investing in new technologies to support the automated preparation and digital toolkits. Cost reductions might need certainly to come from a reduction in headcount among their financial adviser sales force to maintain profitability in the midst of these capital outlays.
But it can be even more complicated for those players who desire to offer a hybrid vehicle service including the digital toolkits of a robo advisor while offering light touch individual counselor services. For these kinds of offerings, distinct tiered account services, with changing fee levels might be a more intelligent strategy
Offering a robo advisor service might be an opportunistic play for wealth management businesses who sit at the nexus of the inter generational wealth transfer which is taking place. .. Losing accounts through the inter generational wealth transfer is a stress for businesses who heavily rely on the Baby Boomers and the Silent Generation for much of their fees. The situation is very different today, while older generations may have profited from traditional advisors during an age of very high returns and interest rates. Companies must navigate these waters carefully not to appear too digital to their traditional customer base, while also not appearing to be laggards to your customer that is younger that is prospective. While a robo advisor service might be an excellent way to keep AUM amounts steady inside the business, as younger family members inherit assets from older ones, it may have to be branded separately from other types of accounts.

FinTech Tendencies :

There’s an age old question in wealth management and investment guidance : Man or Machine. The conflict has started today.
Over the last six years, a related section of FinTech that’s received a lot of curiosity, and a fair share of controversy, is automated investment services… or what’re frequently called “robo advisors. ”
These technology-backed advisors were assembled on the premise that many of the actions performed by a Registered Investment Advisor (RIA) can be replicated by complex intuitive software. They guarantee lower prices, simplicity of making investing “fun” and also the bonus potential.
Robo – advisers like Wealthfront and Betterment have realized something that 99% of startups never do – turning an idea into an organization that is growing, prospering, and has the chance to be a permanent fixture in its industry.
In reality, the $47 trillion wealth management giant BlackRock only acquired FutureAdvisor, another robo advisor platform with $600 million under management

But the process of creative destruction in the FinTech business is occurring so quickly, I started questioning whether dangers that were competitive can already jeopardize comparatively new success stories like these. Looking at the companies that bookend them – the old-guard firms on one side, and the brand new crop of products and startups on the other — I came away with a healthy dose of skepticism on the future of the stand-alone robo-advisor.

Robo Advisors and the Bet on Millennials
One of the central selling points robo advisors made to the VCs who have funded them was a toxic mistrust of more traditional wealth counselors and financial services firms, their DIY attitude, and millennials’ internet savvy. Given the two important financial disasters they’d experienced in their lifetime, these millennials supposedly harbored a degree of mistrust for the fiscal brands their parents revered that would make defection a near-certainty. They viewed the large banks as inherently bad, and perilously self interested.

As it turns out… a recent report conducted by Salesforce indicates that many millennials actually do favor having an advisor.. Eighty-one percent wanted their counselor to manage their money completely alone, or collaboratively with them compared to 86% for Gen- 89% for Baby Boomers and X’ers — not that distinct.
What is more astonishing is that millennials stood out as the generation most interested in face-to-face interactions with the advisor – 47% get investment advice versus 36% for Gen- 46% for Baby Boomers and X’ers. The number one reason millennials gave for firing their adviser was high fees, which robo- counselors have exploited with fees that are a fraction of the cost of conventional wealth management
Millennials are certainly somewhat less comfortable relying completely on technology as the incumbent robo, while their preference for technology was unmistakable – advisers envisaged. There stays a definite desire to learn just how to manage cash, in order to ask questions, express financial goals and to have a trustworthy adviser involved.

In short, it seems that robo- advisors won’t replace the conventional advisor ; they will sit alongside them to provide an optimal blend of human and technology brains.

In response to fit what younger investors are searching for, and to the increase of Wealthfront and Betterment, conventional financial advisors like Schwab and Vanguard recently established “robo advisor platforms” of their own that comprise a substitute for connect to an individual, if desirable.
They’ve slashed fees, and now offer a wider array of investment vehicles than the incumbent robo – advisers. And with early stage investments in FinTech quadrupling recently, it’s no surprise that after only a few months these hybrid platforms attracted an amount of capital that’s many times greater than what the stand-alone robos had accumulated in years.
What this tells us is that Wealthfront and Betterment are correct — many investors have elected to cease paying their more traditional RIAs for a service in which some facets can be performed by technology, info, and automation. And these benefits extend much beyond those who can afford the guidance of Schwab peers are ’sed by it. Millions of middle-income families may have access to a greater degree of guidance that is advanced than their net worth may have ever enabled before
But technology can’t create an investing worldview from an individual ’s special demands and aims, hold their hand and encourage them to stay composed. And these human qualities are valuable to investors than these companies may have estimated
Boom or Doom For Stand Alone Robo Advisors?
Since the incumbents offer merchandise that is similar with comparable fees, the stand alone advisers will need to convince investors that they have something the big guys don’t. Despite the trust and their inventions they’ve constructed with many investors, the stand alone robo-advisors haven’t yet shown they can generate better yields, net of fees. So they’ll need to explain how and why their algorithms are not inferior to the algorithms other companies can create. But if investors find the prospect of managing cash overly complex, the nuances of algorithm building will probably not make for a good advertising hook.
The recent spike in advertising by Betterment and Wealthfront indicates that they feel a need to match Schwab, etc. on their field of battle – which is a scary proposition given how well- financed the big brokerages are, and how seasoned they’ve become at mass media marketing.

It’s also likely to be a losing battle because incumbents like Fidelity and Vanguard can create fees on the inherent ETFs they put in customer portfolios, enabling an extended life value and therefore greater allowance for higher client acquisition prices.

Reed Hastings said that before HBO could become Netflix Neflix had to grow and become HBO. Using this example to the space that is advisory, it appears like the incumbents have refurbished Wealthfront and Betterment ’s secret sauce faster than these firms could replicate that value added human element that Schwab and Vanguard offer
I have no doubt a successful departure lies in these companies futures, but if and when they can be acquired, it’s going to probably be by a traditional company that also realizes that it needs to leverage new technology and become “half- man, half-machine”

Empirica lectures on Fund Industry Summit 2014

Empirica was invited to give a lecture on ‘Usage of Algorithmic Trading in investment funds’ at Fund Industry Summit 2014.

Conference gathered representatives from over 70 financial institutions. The event was held in Warsaw and plans are that it will be repeated in yearly cycles. Especially that both organisers and participants deemed the conference a success.

The agenda of the summit included 9 lectures on topics related to investment funds day-to-day operations like MIFID II and AIFMD European Union directeves, Internet funds distribution and organisation of self-care channels.

Empirica’s lecture, held by its CEO Michal Rozanski on ‘Usage of Algorithmic Trading in investment funds’ was a good opportunity to share with the wider audience results of our latest research regarding market impact reduction in high volume transactions.

 

FIS_Mrz_Speach2

Empirica CEO, Michal Rozanski during the lecture at Fund Industry Summit

Fund Industry Summit 2014

 Empirica CEO, Michal Rozanski during the lecture at Fund Industry Summit

Ekipa z Warszawy

 Our team on Empirica conference stand

Video summarizing Fund Industry Summit 2014

Empirica joins advisory board of London’s FinTech Connect

FintechConnect logo

Michal Rozanski, CEO of Empirica, was invited to join advisory board of FinTech Connect. The main purpose of the board would be to share knowledge and experiences with new fintech ventures looking for support.

FinTech Connect is a new initiative for the global community of financial technology stakeholders – investors, financial institutions, fintech startups and solution providers.

Empirica definitely sees a need for one place where people interested in advancement of financial technologies could exchange ideas, experiences and good practices. We are already taking part in similar initiative but on different field – IT Corner association for local software companies – and advantages of such an initiative are obvious to us. When such an idea gets critical mass of people involved that want to be active, then the effect is much more than the sum of its parts. IT Corner is living evidence of that. Therefore we are great fans and we will happily support the development of FinTech Connect.

FinTech Connect provides a digital hub and meeting place for the fintech sector. It allows start-ups, tech providers, investors and financial institutions to connect and do business through community platform. FinTech Connect has already thousands of members and the count is growing daily. In addition to start up events, FinTech Connect provides global seminars and conferences on subjects such as banking security, cash management and commercial payment strategies for corporate treasurers, and cloud IT platforms for financial institutions.

Steve Clarke, the founder and CEO of FinTech Connect says: ‘We launched FinTech Connect because we wanted to provide a global platform and community for  the fintech industry. With the incredible amount of innovation going on within many different technology hubs around the World, there is a natural element of fragmentation between stakeholders and it can at times, seem like innovation is taking place within micro-communities; either in certain geographies, sub sectors or on a smaller scale again within accelerator or incubator programmes.’

FinTech Connect is also organizing Europe’s most exciting exhibition of fintech startup innovation – FinTech Connect Live. This conference will gather over 2000 fintech professionals, over 100 exhibitors and over 100 speakers and visionaries all in one place for two days in London in December 2015.

 

Learn more about FinTech Connect at: www.fintechconnect.com

and about FinTech Connect Live at: www.fintechconnectlive.com .