Robo-advice failures  – Why it is crucial to wealth managers to improve the core?

It has been announced this month that Investec shuts down robo-advice services due to “low appetite” of customers. This is not the only instance of large players ceasing their automated financial advice offerings for the same reason – last summer UBS decided to sell its UK Smart Wealth robo-advisor to a US fintech, while just last month ABN AMRO announced it was shutting down its German-based Prospery service.
 
Why do the robo-advice offerings fail?
 
In our opinion, one of the factors is a failure to provide a better service, which limits innovation only to a new distribution channel. In all aforementioned instances, customers were offered an expensive service providing them recommendations to invest in pricey mutual funds, which does not suit the low-cost idea of the robotized offerings targeting less wealthy but more abundant classes of society. Other reasons may include over-confidence of the incumbents in their customer bases and therefore, the lack of sensible go-to-market strategies and marketing plans.

Unboxing the Machine Learning “black box” – How to fight bias? 

The application of machine learning techniques transforms the financial industry in various ways – it redefines the customer experiences, investment advice, fraud detection and many other processes. However, new technologies imply the emergence of new risks, gaining particular prominence in the financial sector – as financial decisions made by customers tend to greatly impact their prosperity and well-being.

How to tackle this?
It is important to make sure that there are tools in place enabling to monitor how the AI solutions come to the decisions they make. 

Personalization in Financial Services – Do you innovate meaningfully? 

Personalization is a key selling point of many successful digital offerings. As banks transform to become tech companies, customisation in the context of financial services comes on the agendas as well. However, it is usually the design solutions and smarter interfaces that become a space for the personalization and digitalization efforts – the actual service, run by the financial institutions, has no new inputs for the customer – the investments are selected using the five decades old logic, and the risk preferences of clients are assessed through a set of questions using the logic of psychological tests in popular magazines – which have no regard for inconsistent answers and which do not account for the relationship between the questions. We believe that it is essential for financial firms to go beyond design and innovate meaningfully.

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