iress.com

Eugene van Rensburg

Head: Wealth Management SA

21 June 2016

The Rise of the Robo-AdvisorA threat or an opportunity to the financial advice industry?

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Financial Services Industry Trends

“

”

Convergence

of Financial

and Wealth

Markets

Business Solutions

putting more control

in the hands of the

broker & advisor

Financial Services

Provider Profitability

Pressures & focus on

Wealth Management

revenue by Banks

Increased Regulation

& Convergence

between Traditional

Capital Markets &

Wealth Markets Policy

Global emergence of

Self-directed

investing as personal

financial management

channel

Upselling & Cross-

selling coupled with

efficiency gains in

large financial

services businesses

Better Informed &

demanding Clients

from Retail & Mass-

affluent to

HNW & UHNW.

Multi-channel

capabilities a reality &

demanded by

customers

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Robo-Advice & the digital channel opportunity

A Robo-Advisor is an online wealth management service that provides

automated, algorithm based portfolio management advice

without the use of a human financial planner.

6bnOnline advice

Consumers seek

financial advice online

Banking

transactionsOnline

Mobile phonesAcross the world, exceeding

the number of people in

the world

Expect customer facing staff to have a single view of them in real time70%

41% 85%

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69%

More likely to feel

confident that they

can achieve their

life goals if they

have a written plan in

place, compared to

no plan.

3x

Consumers Seek financial advice

from sources otherthan a financial adviser.

More in retirement

savings of the advised to

the non advised.173%

Global Revenue Opportunity

$175bn -

$200bn

Clients expect

• PERFORMANCE

• TRANSPARRENCY

• ENGAGEMENT

• TRUST

4x

Wealth clients have multiple

wealth management

relationships

73%

$120trillion

Global SavingsManaged by global wealth managers

Wealth clients open

to consolidation of

relationships

57%Consumers open to

switching wealth managers

for superior client experience

40%

Robo-Advice & the digital channel opportunity

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Global status of Robo-advice

United States is used as a barometer of success

of Robo-Advisors in attracting Assets under

Mngt

US Securities and Exchange Commission

reported in January 2016:

• AUM for Robo-Advisors grew by 209% year

on year from Jan 2015 to Jan 2016 totaling

$11,743bn

Whilst these are material nominal AUM, it

represents less than 0.25% of the Private

Financial Wealth in North America.

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Robo-advice in South Africa

• Mixed views:

• Replacing advisers across a large

number of financial services offered

• An opportunity for advisers to better

engage with clients and to make their

businesses more efficient

• Robo-Advisors are expected to:

• Encourage new entrants to wealth

management

• Drive down costs of investing funds

• Unlock new client segments

• Attract younger, technically proficient

clients

• Encourage self help, anytime,

anywhere

• Enable client service in underserviced

markets

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Investment into Wealth Management

• The Boston Consulting Group Survey 2015, examined the total investment allocation by

wealth management institutions and focused on the following two specific categories:

• Investment to enhance existing business, and

• Expanding into new frontiers

• Priorities identified were:

1. Improve sales force effectiveness 2. Enhance digital interfaces

3. Develop a digital advisor channel 4. Develop new client segments

The overall emergent investment theme seeks to

enhance the overall customer experience and

improve business efficiency whilst enhancing and

supporting human sales channels.

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Robo-advice business model

• Business Model

• Robo-Advisor should compliment existing distribution

strategies

• Appeals to a broad range of clients & potential clients

through effective segmentation

• Making money

• Attracting funds under management

• Technology driven so low cost service model

• Ease of use & value - attracts clients back, & easy

referrals

• Typically low value accounts – scale & volume required

• Independence

• Product Providers will be quick to offer Robo solutions,

in order to grow AUM, obviously this route will imply a

loss of independence for advisers tied to the platform

• Advisers can retain independence by setting up their

own Robo solution

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Multiple Stakeholder Perspectives

Business Regulation

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Regulatory Environment Context

Client Expectation

Regulatory Responsibility

Organisational Authority

Business Mandate

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Business Environment Context

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Client Personal Finance Context

Life

sty

le &

E

nte

rta

inm

ent

Com

mu

nic

atio

n

Pri

ma

ry B

an

kin

g

Ris

k P

rod

ucts

Insu

ran

ce

Pro

du

cts

Me

dic

al C

are

Fo

od

& H

ou

sin

g

Ed

uca

tio

n

So

cia

l B

urd

en

Sa

vin

g &

In

ve

stm

en

t

“My Wallet”

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Multi-Channel Financial Services

Full Service Self Service

Internet

banking

PFM

Online

Trading

Self

Directed

Direct to

Client

Automated

Advice

Guided

Scaled

Automated

Call Centre

Scaled

Advised

Limited

Face2Face

Advice

Holistic

Full

Service

Face2Face

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Technology Facilitated Process

Enabler

Single Client Data Store ● Advice Congruence ● Unified Regulatory Compliance

● Data Workflow ● Calculation Consistency ● Usability ● Mobility ● Security

Multi-Channel

Multi-Platform

Multi-level Compliance

Tightly Coupled & Interconnected

External Data

Integration

Fulfilment &

Execution

Product Vendor

Systems

Integration

Product Vendor

Data Integration

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Omni-Channel Financial Services

Full Service Self Service

Internet

banking

PFM

Online

Trading

Self

Directed

Direct to

Client

Automated

Advice

Guided

Scaled

Automated

Call Centre

Scaled

Advised

Limited

Face2Face

Advice

Holistic

Full

Service

Face2Face

Financial Advice Platform ArchitectureSingle Client Data Store ● Advice Congruence ● Unified Regulatory Compliance ● Data Workflow ●

Calculation Consistency ● Usability ● Mobility ● Security

Financial Institution Backend systems

Financial Advice PlatformWorkbench configured specific to advice channel.

Financial Institution Client Platform

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Robo-advisor friend

Robo-Advice should not be

viewed as an adversary or

alternative to traditional advice

models,

but rather an opportunity for

advisors to grow and scale

their business as part of a

multi-advice, multi-channel

proposition

Thank you

iress.com

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