investors‘ attitudes towards robo- …€˜ attitudes towards robo-advisors evidence from the us...

INVESTORS‘ ATTITUDES

TOWARDS ROBO-

ADVISORS EVIDENCE FROM THE US

AND THE UK

Data - Analysis – Implications and Learnings

www.MyPrivateBanking.com

May 2016

Carmela Melone

Analyst

Report Extract

Original Report with 48 pages

Plus full set of US and UK survey data as Powerpoint Slides and Excel file

Report Extract

INVESTORS‘ ATTITUDES TOWARDS ROBO-ADVISORS │ 2

CONTENT TABLE

1.0 EXECUTIVE SUMMARY 4

2.0 METHODOLOGY 7

2.1 REPORT OBJECTIVE 7

2.2 SURVEY SAMPLE 7

2.3 DEMOGRAPHICS 7

2.4 AMOUNT OF INVESTABLE ASSETS – CURRENCY CONVERSION 8

2.5 SURVEY QUESTIONS 8

2.6 DATA ANALYSIS 9

3.0 INTRODUCTION 10

3.1 UK AND U.S. – BREEDING GROUNDS FOR ROBO ADVICE 12

4.0 MAIN FINDINGS 16

4.1 US FINDINGS: INVESTORS ARE PREDOMINANTLY SELF-DIRECTED WITH A

MIXED PICTURE IN TERMS OF SUPPORT FROM AN ONLINE INVESTING PLATFORM 16

4.2 UK FINDINGS: THE YOUNGER UK INVESTORS ARE, THE MORE MIXED THEIR

INVESTMENT APPROACH 23

4.3 THE BIG PICTURE – MILLENNIALS ARE RE-SHAPING THE INVESTMENT LANDSCAPE 33

5.0 INVESTORS’ VIEWS ON ONLINE INVESTMENT TOOLS:

KEY TAKE-AWAYS 35

5.1 DATA RESULTS IN A NUTSHELL 37

5.2 IMPLICATIONS / LEARNING POINTS 38

APPENDIX 39

SURVEY QUESTIONNAIRE 39

PROVIDERS OF ROBO-ADVISORS 44

AUTHORS 47

DISCLAIMER 48

To order the full report, please click here.

http://www.myprivatebanking.com/CMSPages/ContactUsReport.aspx

Report Extract


TABLE OF CHARTS

Hybrid online investment services – key benefits 11

Current robo market coverage 12

The growth of the robo-advisor market 13

How robo-advisor terms are trending on Google 14

US investors’ willingness to pay for robo vs. human financial advice 17

Robo-advisor brand awareness in the US 19

Desirable technical features of online investment tools 21

People’s view about replacing in-person advice with digital communication tools 22

UK investors’ investment experience by age segment 25

How UK investors interact with their financial advisors/institutions by wealth segment 26

What do UK investors think about the likeliness that digital channels will replace in-person advice? 27

UK investors’ willingness to pay for robo vs. human financial advice 29

Technical features UK investors think robo-advisors should have 30

UK investors’ satisfaction levels with regard to their wealth managers’ services 31

Awareness of the robo technology among the respondents (US vs. UK) 32

Willingness to pay for robo advisory services: UK vs. USA 33

What people think about robo-advisors’ benefits 35

What people think about robo-advisors’ shortcomings 36

Report Extract


SUMMARY

The majority of affluent and high-net-worth

individuals recognize the potential of robo-advisors

and automated investment services to add value to

their wealth management services. This is a main

finding of MyPrivateBanking’s recent quantitative

panel survey, with insights from 600 affluent and

wealthy investors in the US and the UK. The report

analyzes in depth the views and opinions of

individual investors with regard to the robo-advisor

topic. Besides exploring investors’ attitudes

towards specific features of online investment

platforms, the survey tests brand awareness and

the target market’s level of openness towards

innovation in this field. In addition to the

comprehensive analysis all results are detailed in

extensive data appendices.

HIGH-NET-WORTH INDIVIDUALS USE ONLINE

INVESTMENT TOOLS MORE THAN OTHER

INVESTORS

More than 70% of overall respondents think that

such tools can positively influence their wealth

manager’s advice and decision-making process and

that automated advice potentially speeds up

onboarding processes such as registration and

account opening, making these processes more

efficient and convenient. This underlines how the

young and the wealthy are especially showing a

great openness, awareness and knowledge about

robo advice.

Interestingly, the adoption of automated wealth

advice is happening faster in the high-net-worth

segment than mass affluent with current usage of

online wealth management tools at 43% and 17%,

respectively.

The report also identifies the major concerns

investors have in respect to robo-advisors and how

the respondents rate the quality of human advice

compared to that of robos.

UK AND US INVESTORS ARE BOTH OPEN TO

ROBO-ADVICE, BUT DIFFER IN THEIR

SENSITIVITY TO PRICE

Overall, investors on both sides of the Atlantic

show strong similarities in their awareness and

openness towards automated / robo advice, which

are detailed in the report. Despite the trends both

countries have in common, some striking

differences were also observed. Among them, this

includes the finding that UK investors would pay

more for robo (and human-only) advice and in the

US, a much higher share of respondents state that

they don’t think they will use robo advice tools in

the future. The report identifies the price point

investors would pay and also the various levels of

brand awareness current leading robo-advisors

have with investors in the US and UK.

WEALTH MANAGEMENT INDUSTRY’S FUTURE

WILL BE IN AUTOMATED ADVISORY

SERVICES

The report provides clear, empirical evidence on

why automated advice and robo services are a

significant part of every wealth manager’s future. It

shows how automation can enhance client

satisfaction throughout the different stages of the

advisory process and which channels investors like

to use to contact their wealth managers. The

report also identifies the most important value-

added services investors would like to see in a

robo-advisor tool and to which target segments

automated services appeal most.

Report Extract


2.0 METHODOLOGY

2.1 REPORT OBJECTIVE

This report aims to reveal affluent and high-net-

worth investors’ views and opinions with regard to

the robo-advisor topic. Besides identifying

investors’ attitudes towards specific features of

online investment platforms, the survey tests

brand awareness and the target market’s level of

openness towards innovation in this field.

Additionally, we evaluate the digital

communication behavior of clients including their

preference for different channels and online

features, in order to track developments since our

Global Survey of Mobile Disruption in Wealth

Management 2014.

2.2 SURVEY SAMPLE

This report is based on a quantitative panel survey

launched in March 2016. The survey consists of 19

questions targeting mass affluent, affluent and

high-net-worth individuals in the UK and the US.

We selected these two countries as they are

today’s hotspots for FinTech startups and robo-

advisor tools.

The 600 participants in our survey were randomly

selected based on the following criteria:

(… more in full report)

2.3 DEMOGRAPHICS

The following table shows the distribution for the

most important variables by market.

(Details in full report)

Traits Variable USA UK

Age group

18-29 13% 23%

30-39 31% 27%

40-49 27% 29%

50-59 20% 16%

60+ 9% 5%

Gender Male 43% 58%

Female 57% 42%

Amount of investable

assets

$100k-$200k

91% 81%

$200k-$500k

8% 14%

More than $500k

0.7% 4.3%

(Note: n=600, some totals in the table are

shown as rounded values. )

http://www.myprivatebanking.com/Report/global-survey-of-mobile-disruption-in-wealth-management-2014

http://www.myprivatebanking.com/Report/global-survey-of-mobile-disruption-in-wealth-management-2014

Report Extract


2.4 AMOUNT OF INVESTABLE

ASSETS – CURRENCY

CONVERSION

In order to determine the segments for the

amount of investable assets, MyPrivateBanking

Research classified the ranges accordingly when

converting the segments into other currencies.

However, as currencies fluctuate over time, future

translation back to USD may cause values to differ.

Mass affluent

Affluent HNWI

US Up to $500k

$500k - $1 million

More than $1 million

UK Up to £300k

£300k - £600k

More than £600k

Throughout the report, the ranges are quoted in

USD for consistency.

2.5 SURVEY QUESTIONS

This report aims to analyze the attitudes of

affluent/wealthy individuals towards the use of

automated advice/guidance platforms, such as

those launched in the past 10 years, often by new

entrants characterized as FinTech players.


Our questions to investors cover the following

areas:


The full questionnaire is available on page 11 of

this extract.

2.6 DATA ANALYSIS

After the field phase, the data was analyzed with

regard to basic statistical measures such as

frequency distributions. In addition to the overall

statistics, the sample was segmented by country,

age group and the amount of investable assets in

order to determine any significant differences and

demographical trends.

The full survey results are available in the data

appendix.

Report Extract


3.0 INTRODUCTION

(… more in full report pages 10 to 15)

4.0 MAIN FINDINGS


5.0 INVESTORS’ VIEWS ON

ONLINE INVESTMENT

TOOLS: KEY TAKE-AWAYS


APPENDIX 1: PROVIDERS OF ROBO-

ADVISORS

The market overview charts in chapter 3 are based

on the following list of global providers of robo-

advisors or hybrid solutions for financial advice,

which does not claim completeness. Some

companies included do not yet offer their robo

advice product but are planning do so in the next

months (listed with those launched in 2016).


Report Extract


APPENDIX 2: DATASET U.S. (Powerpoint):

U.S. SURVEY

What do affluent and HNW investors

think about robo-advisors?

1

Report Extract


APPENDIX 3: DATASET UK (Powerpoint):

Report Extract


APPEDNIX 4: FULL DATASET (Powerpoint):

Report Extract


APPENIX 5: FULL SURVEY DATASET FOR 600 RESPONDENTS

(…)

Report Extract


SURVEY QUESTIONNAIRE

INTRO:

There is a growing market of online tools that help users to develop investment strategies and monitor the

performance of their assets – a task traditionally performed by a financial advisor. In our study that will be

based on this questionnaire we would like to test the readiness of affluent and high-net-worth people to

using such online investment tools (also known as “robo-advisors”).

1.) Which of the following statements matches your investment type best?

I leave all investment decisions to my advisor

I consult my advisor before I make investment decisions but I take them myself

I take all decisions myself without consulting an advisor or an online investment platform

I take investment decisions myself but I am consulting an online investment platform

I delegate all my investment decisions to an online investment platform (robo-advisor)

2.) How do you usually interact with your financial advisor/financial institution?

In person

Via telephone

Via e-mail

Via text or video chat

On social networks

Via mobile apps offered by my financial institution/financial advisor

Other

3.) How much experience do you have in investing in the following?

Stocks

Bonds

Cash

Real estate

Savings account

Life insurance

ETFs

Mutual funds (US) | Unit trusts / OIECs (UK)

4.) Have you heard about/are you familiar with the concepts of robo-advisors, online investment

platforms or automated investment services?

I never came across these concepts or terms

I’ve heard/read about them

I know quite a lot about these concepts

I know them in detail

5.) Are you already using an online investment platform that supports you in your investment decisions?

yes (Q6)

no, and I don’t think I will in the future (Q7)

no, but I could imagine using an online investment tool in the future (Q6)

Report Extract


6.) What share of your investable assets would you consider managing/are you managing with an online investment tool? Jump to Q8 Less than 10 % Between 10% and 25% Between 25% and 50% Between 50% and 75% Between 75 and 100%

7.) Would you be more likely to use such an online platform if it was recommended by a trusted online service provider you already use (e.g. car/home/life insurer, sports club,…)? scale: very unlikely – unlikely – neutral – likely – very likely

8.) How much time would you expect to spend on completing a questionnaire about yourself during registration process? Up to 5 minutes Between 5 and 10 minutes Between 10 and 20 minutes Between 20 and 30 minutes More than 30 minutes

9.) What topics should such a questionnaire cover in your opinion? Age Family Income Planned retirement age Investable assets Attitude to risk Financial knowledge Personal investment preferences (e.g. social impact or ethics) I don’t know Other:

10.) Do you agree or disagree with the following: With regard to client-advisor collaboration, online

investment tools…

can help financial advisors to make better decisions/to improve the quality of their advice

can make registration and/or account opening processes faster and more efficient

can improve the client-advisor relationship through convenient contact options like text or video

chat

can help to make the advisory process more transparent and objective

11.) Do you agree or disagree with the following statements on the downsides of online investment tools?

These tools are too expensive

These tools are not transparent enough

My financial advisor knows me better than an online investment tool could ever do

I don’t believe a software platform can give advice of equal quality to a human advisor’s

I don’t think online-based investment tools are trustworthy

Advisors will probably rely too much on these tools and will stop to think and research on their own

Report Extract


12.) Which of the following companies do you connect with tools that support investors through online

investment tools?

US Survey UK Survey

Betterment Money on Toast

FutureAdvisor Nutmeg

Jemstep Moneyfarm

Wealthfront Zen Assets

Charles Schwab Intelligent Portfolios Wealth Horizon

Vanguard Personal Advisor Services Other, please specify

Wisebanyan

SigFig

Personal Capital

LearnVest

Other, please specify

13.) How satisfied are you with the following services of your existing wealth manager/financial advisor?

Retirement planning/Financial planning

Asset selection

Monitoring the investor’s assets

Automatic adjustments to the investor’s assets (re-balancing of portfolio)

Trading

Personalized investment proposals that match unique preferences, e.g. in terms of ethics or social

impact (‘thematic investing’)

Reporting

Access to research reports

Legal advice in financial matters

Investment account aggregation

Tax optimization

14.) For which of the following investment tasks would you consider to get support from an online advisory

platform?

Retirement planning/Financial planning

Asset selection

Monitoring the investor’s assets

Automatic adjustments to the investor’s assets (re-balancing of portfolio)

Trading

Personalized investment proposals that match unique preferences, e.g. in terms of ethics or social

impact (‘thematic investing’)

Reporting

Access to research reports

Legal advice in financial matters

Investment account aggregation

Tax optimization

Others (please enter)

I don’t know

Report Extract


15.) What technical features do you think an online investment tool should offer?

A corresponding mobile app

A mobile optimized website

Highest security and encryption standards

Chat function for live support

Video chat

Call center with live support

Quick and simple registration process

Other (please specify)

I don’t know

16.) Do you think that digital tools/features, such as apps, social media and chat are likely to replace in-

person or telephone advice to a large extent?

scale: very unlikely, unlikely, not so likely, likely, very likely

17.) Suppose you decided to use an automated online advisory tool to manage your investments: how

much would you be prepared to pay in fees as a percentage of your managed assets?

Less than 0.1%

Between 0.1% and 0.2%







More than 1.5%

I don’t know

18.) How much are you prepared to pay for a regular (human) financial advisor as a percentage of your

managed assets?

Less than 0.1%








More than 1.5%

I don’t know

Report Extract


19.) What is the approximate value of your investable assets?

US UK

Up to $ 200,000 Up to £ 125,000

$ 200,000 - $ 500,000 £ 125,000 - £ 300,000

$ 500,000 - $ 1 million £ 300,000 - £ 600,000

$ 1 million - $ 5 million £ 600,000 - £ 3 million

More than $ 5 million More than £ 3 million

Report Extract


AUTHORS

Carmela Melone, Analyst, specializes in research in the fields of social media for

wealth management and mobile apps for financial advisors. Her specific areas of

interest are in software benchmarking, channel strategy and online security. Prior

to this, she worked at an exchange platform for intellectual property rights,

responsible for the digital media marketing strategy. Carmela has a Bachelor’s

degree in International Economics and European Studies from the University of

Tübingen (Germany).

Emma Haffenden, Senior Analyst, has over 10 years of experience in wealth

management and technology, mostly delivering analysis, business and technology

strategy consulting and research services to C level Executives of the leading global

financial institutions. In her previous roles, she led the Wealth & Private Banking

practice at Expand Research, a subsidiary of BCG, and was a Senior Consultant and

member of the Wealth Leadership team at Capco in London. Emma has a degree in

IT and Criminology, and a Master’s in Database Systems from the University of

Westminster.

To order the full report, please click here.

http://www.myprivatebanking.com/CMSPages/ContactUsReport.aspx


DISCLAIMER

IMPORTANT NOTICE AND DISCLAIMERS:

NO INVESTMENT ADVICE

This report is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where

such an offer or solicitation would be illegal. This report is distributed for informational purposes only and

should not be construed as investment advice or a recommendation to sell or buy any security or other

investment, or undertake any investment strategy. It does not constitute a general or personal

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individual investors. The price and value of securities referred to in this report will fluctuate. Past

performance is not a guide to future performance, future returns are not guaranteed, and a loss of all of the

original capital invested in a security discussed in this report may occur. Certain transactions, including those

involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all

investors.

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any loss or injury resulting directly or indirectly from the use of the information contained in this report,

caused in whole or in part by its negligence in compiling, interpreting, reporting or delivering the content in

this report.

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