HYBRID ROBOS- HOW COMBINING HUMAN AND AUTOMATED WEALTH ADVICE DELIVERS SUPERIOR RESULTS AND GAINS MARKET SHARE

Case studies - Recommendations – Strategies

www.MyPrivateBanking.com

February 2016

Francis Groves

Senior Analyst

Report Extract

Original Report with 66 pages

HYBRID ROBOS │ 2

CONTENT TABLE

1.0 EXECUTIVE SUMMARY 4

2.0 METHODOLOGY 8

3.0 THE APPLICATION OF AUTOMATED MODELS TO

EXISTING PATTERNS OF WEALTH MANAGEMENT 10

4.0 ADVISORY MARKET SIZE AND GLOBAL GROWTH 31

5.0 RECOMMENDATIONS AND STRATEGY FOR

HARNESSING HYBRID ROBO TRENDS 38

6.0 CASE STUDIES 43

CAPITAL ONE INVESTING 43

HEDGEABLE 46

INVESCO/JEMSTEP 50

LIVERPOOL VICTORIA RETIREMENT/WEALTH WIZARDS ONLINE PENSION ADVICE 54

CHARLES SCHWAB, SCHWAB INSTITUTIONAL INTELLIGENT PORTFOLIOS 59

AUTHORS 65

DISCLAIMER 66

IMPORTANT NOTICE AND DISCLAIMERS 66

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TABLE OF CHARTS

Hybrid Robo U.S. Timeline 11

Advisor Now, formerly Upside; the (hybrid) pitch to financial advisors 15

Betterment: going for the retirement savings market 19

Charles Schwab: not worried about cannibalization 20

North America: Market Prognosis for Hybrid and Pure Robos 35

Rest of the World: Market Prognosis for Hybrid and Pure Robos 35

North America: Market Share of Different Robo Solutions 36

Rest of the World: Market Share of Different Robo Solutions 36

The Hedgeable platform offered as an integration on the Hedgeable Institutional website 41

From Hedgeable’s Instagram page 46

From the Hedgeable blog: an investment methodology sword fight with Wealthfront 47

Advisor firm branding of Schwab Institutional Intelligent Portfolios 59

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EXTRACT OF THE EXECUTIVE SUMMARY

EXTRACT OF THE EXECUTIVE

SUMMARY

(Executive summary in full report pages 4 to 7)

After the strong growth of the robo-advisory

approach in recent years, promoted by numerous

start-ups worldwide as well as a sizeable number of

early adopting wealth managers, a new ‘sub-

species’ has emerged: the hybrid robo/personal

contact service, which adds a substantial

component of human interaction to the use of

software for the client advisory process.

In our view, hybrid robo-advisory strategies

represent a paradigm shift in the pace and path of

change in the wealth management industry.

MyPrivateBanking estimates that hybrid robo

services will by 2020 grow to a size of USD 3,700

billion assets worldwide; by 2025 the total market

size will further increase to USD 16,300 billion. This

number constitutes just over 10% of the total

investable wealth in 2025. By comparison, “pure”

robo-advisors (completely automated without

personal service added on) will have a market share

of 1.6% of the total global wealth at that stage. The

report includes a projection for the market size and

global growth of Hybrid Robo-Advisors and pure

play robo-advisors, including a breakdown between

North America and the rest of the world, and a split

by the retail and affluent wealth and the

HNWI/UHNWI segments.

Hybrid robo solutions are a dynamic and also

unstable new phase in the wealth management

industry’s transformation. We expect 2016 to be a

year of significant developments – several major

players have announced that they will reveal their

hybrid offerings in the course of the year and many

more wealth managers are currently working

through the issues of hybrid robo adoption.

Institutional players entering the robo-advisor

markets and their offerings are analyszed in detail

in the report.

HYBRID SOLUTIONS WILL IMPACT MANY

FINANCIAL SERVICES SECTORS

The drivers for hybrid robo innovation will come

from several different sources within the global

financial industry. For a start there is the inspiration

derived from the original robo-advisor services. To

this must be added the new opportunities that have

arisen following the launch of a substantial range of

new B2B technology providers, some focused only

on the banking and wealth management industries

and others with a broader scope.

The next 12 to 18 months will provide numerous

demonstrations of the impact of the new (white

label) technology providers and robo/conventional

partnering on wealth management. In particular, as

this report’s case studies show, the resulting hybrid

wealth management solutions will spring up in a

number of different parts of the global finance

industry. Furthermore, with the help of robo

technology, MyPrivateBanking expects to see a

significant increase in quasi-wealth management

services from sections of the industry that have

been considered as distinct from wealth

management, such as pension providers, fund

managers and retail banks.

The robo model of investment portfolio

management will be good enough in the eyes of a

larger proportion of investors than the wealth

management industry itself yet seems ready to

recognize. Moreover, hybrid robo-advisory services

will increase the efficiency of advisors, in terms of

numbers of clients served per professional, and the

increasing numbers of hybrid solutions will also

have a significant downwards effect on the client

charges the market will bear.

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EXTRACT OF THE EXECUTIVE SUMMARY

WEALTH MANAGERS SHOULD IMPLEMENT

ROBO ADVISORS SOLUTION FAST, BUT

THOUGHTFUL

The report highlights 20 different

recommendations for consideration by wealth

managers in weighing up hybrid robo opportunities,

among them:

Wealth Managers should be wary of assuming that one or more robo-advisory elements can be just ‘added on’ to an existing service.

Especially in the retail and affluent segments, tie-ups with non-financial retail services of various kinds will be of increasing importance for the success of robo-advisory client recruitment.

For most wealth managers the path to a hybrid solution will have several stages; this is fine but clients’ awareness of the capabilities of automation will be increasing rapidly in the next few years.

In the higher wealth segments, wealth managers who automate ‘behind the scenes’ processes will be best placed to introduce client facing robo elements when they’ve established their client-base is ready.

HYBRID ROBOS │ 6

METHODOLOGY

2.0 METHODOLOGY

To provide an outline of MyPrivateBanking’s

approach in this report on hybrid robo-advisory

services, this chapter gives a brief description of our

overall methodology together with the thinking

behind our selection of case studies. We also

include here our working definition of hybrid

robo/personal contact and information about the

approach to wealth segmentation that we have

used.

(… more in full report pages 8 to 9)

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THE APPLICATION OF AUTOMATED MODELS TO

EXISTING PATTERNS OF WEALTH MANAGEMENT

3.0 THE APPLICATION OF

AUTOMATED MODELS TO

EXISTING PATTERNS OF

WEALTH MANAGEMENT

(… more in full report pages 10 to 30)

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THE ADVISORY MARKET SIZE AND GLOBAL

GROWTH

4.0 THE ADVISORY MARKET

SIZE AND GLOBAL GROWTH

(… more in full report pages 31 to 37)

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RECOMMENDATIONS AND STRATEGY FOR

HARNESSING HYBRID ROBO TRENDS

5.0 RECOMMENDATIONS AND

STRATEGY FOR HARNESSING

HYBRID ROBO TRENDS

(… more in full report pages 38 to 42)

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CASE STUDIES

6.0 CASE STUDIES

(… more in full report pages 43 to 64)

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AUTHORS

AUTHORS

Francis Groves, Senior Analyst, is a senior analyst for the research on vendors, mobile

apps and online services. His specific research interest is communication and

understanding in relation to finance topics and investor motivation. He has over 30

years of experience in the field of online business information, having worked for

Reuters, the Financial Times and LexisNexis. Francis speaks at conferences and events

and has published several books and articles. Among them 'Corporate Actions, A

Concise Guide' and 'Exchange Traded Funds, A Concise Guide to ETFs'. Francis has a

degree in History, which he studied at the London School of Economics.

Steffen Binder, Managing Director and co-founder of MyPrivateBanking Research.

Steffen is Head of Research and oversees the research agenda and analyst teams. He

is responsible for creating and developing powerful concepts and relevant content to

help our clients navigate a rapidly changing digital environment. As a regular speaker

at finance and technology industry events around the globe, Steffen is frequently

quoted by leading business media such as the Wall Street Journal, Handelsblatt and

the Financial Times. Prior to this, Steffen was Managing Director of Forrester Germany,

Switzerland and Austria. He came to Forrester through its acquisition of Forit GmbH,

a leading European technology research company, of which he was also a co-founder.

Prior to that, Steffen was a partner at Monitor Company (Strategy Consulting). He holds Master’s Degrees in

Organizational Behavior from Rutgers University (USA) and in Public Administration from the University of

Konstanz (Germany).

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DISCLAIMER

DISCLAIMER

IMPORTANT NOTICE AND DISCLAIMERS:

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