Big four's love-hate relationship with fintech grows
Westpac's deal with Ignition Wealth shows established players are embracing robo-advice.
Westpac, Australia’s second-largest bank, has expanded its robo-advice offering by securing a partnership with Ignition Wealth.
The partnership, it is hoped, will allow the banking major to tap a new sector of the asset management market: low net-worth individuals, as well as see off the threat from fintech disrupters.
“In Australia the cut off is $500,000 to have an independent advisor talk to you. That equates to roughly 15 percent of the population,” Mark Fordree, CEO of Ignition Wealth, told AltFi.
“Digital advice will never reach 100 percent [of the population], but if it adds another 15 percent that doubles the amount of people being advised.”
Ignition Wealth is a “hybrid model” robo-advisor, offering both robot-generated advice as well as advice from professionals. Fees go up or down depending on whether an investor wants to be advised by a human or a robot.
As well as making financial advice affordable for investors, Mr Fordree says Ignition also improves the affordability of advice for businesses by reducing compliance costs.
“The massive opportunity globally is that as the cost of advice increases because of compliance, a digital compliance piece can lower the price of goods sold, Mr Fordree said.
“The outcome is a win-win-win for the advice provider, consumer and technology provider.”
Like others in robo-advice, Mr Fordree is optimistic about how far out to water robo-advice will carry financial services. He estimates that robo-advice will capture 75 percent of the market over the next five years.
“We see this in a very similar way to how we saw internet broking and internet banking… so the existing large players I believe simply have a build or partner choice. Those that haven’t already started they’ve probably left it too late.”
Westpac’s extending its arm to Ignition Wealth comes after failing to build out its own robo-advice product. The product, called “BT Go Invest” was shut down in 2017 after an internal review found its fees were too low and AUM too small to justify the expense.
Westpac were contacted for comment by AltFi but declined.