Is the hybrid model the future for robo-advice and digital wealth management?

By Daniel Lanyon on Wednesday 4 October 2017

Savings and Investment

As WealthTech firms look to scale up to profitability, some are turning to a mixture of traditional human advice alongside automation.


Hybrid advice models combining digital tools with human interactions are as valued by High Net Worth Individuals as wealth manager-led offerings, according to recent research.

The 21st edition of the 2017 World Wealth Report (WWR) from Capgemini, found that HNWIs are most likely to embrace hybrid advice once a wealth-management relationship is well established. At the early stages of a relationship, when financial goals are being outlined and risk tolerances set, nearly two-thirds of HNWIs (60.2 per cent) prefer to work directly with a wealth manager, however.

By the time the relationship matures to reporting on performance and making adjustments, the preference to interact with wealth managers falls to 37.5 per cent (as compared to 42.7 per cent for hybrid and 19.7 per cent for automated).

Executive Vice President Anirban Bose, Head of Global Banking and Capital Markets at Capgemini, said, “With global wealth at record highs, the 2017 World Wealth Report findings are especially critical for wealth managers moving towards delivery of hybrid advice. Firms can jumpstart their hybrid journey by focusing on transformation related to people, processes, and propositions.”

Acceptance of hybrid advice also varies by region and demographic. Those in Europe and Asia-Pacific (excl. Japan) are most inclined to embrace hybrid services (where the hybrid advice approach is preferred in four of the five client life cycle stages), while those in North America are the least likely.

The youngest HNWIs (under 40 years), meanwhile, prefer a hybrid approach for all five lifecycle stages, especially for the “develop wealth strategy” (60.8 percent) and “manage on-going advice and optimization” (60.0 per cent) phases, indicating that the wave of hybrid advice sweeping the industry is here to stay.

As firms re-orient their strategies to accommodate growing HNWI interest in hybrid advice, they will also have to plan for potentially serious alterations to their business models. The move toward hybrid advice could usher in compressed revenue margins for more commoditized offerings, for example, putting greater pressure on performance.

Even as the industry moves towards hybrid advice, wealth managers must keep abreast of ongoing technological developments, WWR findings suggest.

Some, including voice interaction and artificial intelligence, have the ability to dramatically alter the wealth management playing field.

Based on responses from over 2,500 high net worth individuals across 19 major wealth markets in North America, Latin America, Europe, and Asia-Pacific, the Global HNW Insights Survey explores HNWI investment behaviour including asset allocation, fee models and investment preferences.

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