This month, in our subscriber magazine, we are back to exploring the industry’s favourite topic – robo-advice. Love them or hate them – you can’t ignore them, and they are certainly not being ignored in Germany (you can read more about that in the February edition). Whether or not the different automated advisory service offerings are luring away wealthy clients and ‘disrupting’ the market, one thing is for certain. They have been instrumental in shaking private banks and wealth managers out of their comfort zones.

Traditionally, private banks have not been as fast as retail banks or even credit card companies to embrace the digital world. There are several reasons for this – major ones being that the clients these banks deal with are typically high value, extremely private and steeped in interpersonal relationships and service. 

When it comes to modernising themselves, front to back on the technology spectrum, it hasn’t been an easy or straightforward journey for wealth managers. Legacy systems and complex products and services have posed barriers as have old-school skills and mind sets. But change has come about. 

Millions of dollars and massive projects later, several private banks have launched nifty online and mobile banking interfaces, advanced PFM tools, enhanced data management capabilities and robust security provisions. These efforts are, of course, ongoing. Some banks (think UBS, Credit Suisse…) have even set up their own innovation hubs to push new ideas and products, sometimes in collaboration with regulators. Artificial Intelligence has come to the fore with gusto and social media is also being exploited to gain clients’ attention (an almost unexplored area until recently).

Perhaps this is all a case of changing with the times and being more compliant and efficient, but a significant amount of this transformation can be attributed to the advent of robo-advisors. 

FinTech players – with their new technology and ideas – have changed customer behaviour greatly. While private banks were perhaps thinking that only the mass affluent, under-40-year-old clients would be keen on automated advisory services, the over-50s and 60s high net worth clients were equally interested in these new offerings, and proved this via high uptake. 

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Robo-advisors came with a fresh slate and refreshing options. They were also largely low risk and easy to understand. This has , in the long run, pushed private banks to become more accessible and agile (Swiss banking giant UBS is proving this with the launch of UBS SmartWealth soon in 2017).

At the end of the day, robo-advisors and private banks largely need one another. While the banks have global footprints, trusting clients and solid reputations – not to mention the ready capital and massive workforce – the start-ups have innovation and technology going for them. Coming together and using the best of one another’s capabilities is to everyone’s benefit – most importantly the client’s.

Robo-advisors may have been over-hyped in the last three years and they are still mushrooming across the world with a majority having no disruptive potential. But they have managed to change things in even the most traditional private banking markets (Nutmeg in the UK, Wealthfront and Betterment in the US to name a few) to prove that no client is out of reach and no bank in infallible. Yes, we are still talking about robo-advice, but it is the industry’s favourite topic for a reason.