platforms for investment portfolios from non‐professional managers (wikifolio),
new banks to deposit cash (number26).
(b) Convenience‐driven investors: Wealthy internet savvy investors also include people who want to delegate as many money matters as possible to their partners from the financial industry: On the one hand they are highly attracted by the capabilities of modern digital technologies in many areas of interest, e. g. when it comes to using social media apps for communicating with friends or colleagues or booking holiday trips and shopping online etc. But on the other hand, when it comes to money matters they do not particularly want to deal with or devote time to all necessary aspects.
These customers might use discretionary investment management services offered by robo‐advisors – given the growing number of players in Europe, this paper can only draw a short and incomplete list of incumbents, e. g. MoneyFarm from Italy, Nutmeg from the UK, Ginmon, Scalable and Vaamo from Germany, Indexacapital from Spain, Yomoni from France. As the above mentioned examples from the USA show, also European convenience‐driven but also technology‐affine investors might alternatively stick to the newly introduced robo‐solutions offered by their above mentioned traditional wealth managers, e. g. brokers, asset managers and private banks [31, 32]. (c) Hybrid, advice‐seeking investors: Finally, there are hybrid investors who on the one hand want digital services to e. g. receive up to date information on the performance of invested assets, to secure transparent and lean administration and to receive modern portfolio allocation enabled by artificial intelligence. But on the other hand they also expect personal communication and advice up to regular face‐to‐face meetings with their account manager.
These investors might be served by ‘hybrid‐robos’. An example for this approach integrating technology‐enabled investment management and the availability of a tied force of agents is the US‐based company Personalcapital. It offers digital investment management solutions like the ‘traditional’ clean‐play robo‐advisors, but also gives access to their team of financial advisors – this ranges from a digital, video‐based offering for smaller portfolios to personal visits of advisors to major clients. In addition, it provides a suite of self‐service financial calculation and reporting tools that even might be interesting for the above mentioned self‐directed investors.17
Integrated, hybrid robo‐approaches have not been developed for Europe yet. But partnerships of clean‐play robo‐advisors with independent financial advisors or acquisitions by banks have recently been announced (e. g. cooperation of Scalable with KSW, acquisition of easyfolio by bank Hauck & Aufhäuser in Germany). Depending on the underlying financial services license (e. g. portfolio management under § 33 of KWG/German Banking Act), smaller portfolios with a discretionary mandate can be handled in a more standardized and cost‐effective way, while wealthier clients receive the opportunity to access personal advice.
A similar approach might be developed by the administrators of broker pools. Today, they support their member IFAs18 and provide access to product suppliers for investment funds and ETFs, offer operational as well as sales support and organize mutual liability protection. In addition to these traditional services, the pools might partner with Fintech companies or themselves build a standardized algorithm‐driven portfolio management comparable to robo‐advisors. If they offer a suite of self‐service financial calculation and reporting tools in addition, their member IFAs will be able to combine their today’s personal sales approach with more sophisticated consulting and portfolio management skills, as a consequence approaching the hybrid advice‐demanding investors.
In the end, the question remains how wealthy internet‐savvy investors will find their way through the broad spectrum of digital, analog and even hybrid offerings of banks, brokers, advisors, robots, etc., irrespective of their (generic) customer profile.
One answer might be the creation of a new type of player, comparable to an ‘investor’s agent’: To begin with, it can help the investor to analyze and understand his/her needs, e. g. define long term targets, become clear on risk/return expectations, but also sort out own skills and willingness to manage the investments themselves or outsource it to a financial partner. Like a portal, the investor’s agent might also provide access to self‐service financial tools for those who deserve so, and propose e. g. potential brokers, banks, custodians as well as IFAs and robo‐advisors to self‐directed or convenience‐driven investors. Those wealthy internet savvy investors who demand a more tailored or an even personal advice can be serviced accordingly: The investor’s agent will offer a human interface (e. g. video conferencing, IP‐telephone, instant messaging, screen sharing, or even a visit at home or in the office). In addition, the agent might change role from a more neutral gateway to financial services to a long term investment advisor – in the latter case, the services offered may span from pure funds/ETF sales to discretionary management to family office type of full‐service.
Another answer might be that due to their high affinity to technology and digital services wealthy, internet savvy investors themselves will move toward the most appropriate solutions for their liquid assets. Those solutions are then (still) sourced from traditional players that have understood the digital needs of the investors and either come up with own digital offerings or invest in/partner with Fintech players. Alternatively, the solutions to manage the huge amount of funds of this attractive customer segment may be provided by new Fintechs that are able to position themselves as ‘best‐in‐class’, thus capturing a significant part of the wealth management industry’s gross revenues.
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Footnotes
1“Unless mentioned otherwise Fintech in this paper encompass technology solutions for retail customers (b‐to‐c and/or c‐to‐c). If used in a broader sense, Fintech also include solutions for small and medium sized businesses as well as big corporates and institutional customers of banks/financial institutions (b‐to‐b); or, in the widest sense, also for the insurance sector (‘Insurtech’).
2The quoted list of top 50 established Fintech companies produced by KPMG and H2Ventures is based on four groups of factors (total capital raised, rate of capital raising, location, degree of sub‐industry disruption) and an adjustment by a judging panel’s subjective rating of the degree of product, service, customer experience and business model innovation; the definition of Fintech also includes Insurtech and solutions for corporate/institutional customers.
3Numbers on Fintechs in this paragraph include direct services to clients and software suppliers founded since 2000, valued at USD 500 million or more, also exits, public companies, real estate plays and not pure‐play Fintech but with substantial operations in that vertical; also see [5, 7–9].
4Different to [1], the top 50 banking‐related Fintechs illustrate a slightly different view: between 45 to 50% focus on retail solutions, approx. 40% on SMEs and the rest on bigger corporates and platform/enabling technologies [5].
5Based on research commissioned by the authors of this paper, executed in November 2015 by Norstat Deutschland GmbH (Kaflerstr. 8, D‐81241 Munich), in the form of an online panel with 1048 participants from Germany; in the research internet savvy individuals are defined and pre‐screened as willing to participate in an online panel and indicate to use internet/mobile for banking and/or brokerage [15].
6Data from Eurostat with EU28 average [16]; minimum internet usage once a week, but less than daily; daily usage by ca. 60% of citizens [17, p. 9]. report that 83% of households have access to the internet at home and 43% through mobile phone.
7Approaches to segmentation in wealth management are offered by [19, p. 5 f., 20, p. 3 f.]; an example for segmentation using asse
t and income situation is delivered by [21, p. 328 f.]; an empirical analysis of a specific investor segment can be found at [22, p. 194 f.].
8Research in Germany: aged 25 to 65 years; individuals with net household income < €3000 excluded unless possession of liquid monetary assets > €30,000.
9Extrapolation is based on population data only as average possession of liquid assets per capita in Germany is about Euro zone level [23, 24, pp. 6–12]; population in Germany ca. 16% of EU28 with about similar share of age group 18–65 on total age structure in EU28 countries; extrapolation factor of six applied based on German share of EU population; no consideration of different internet/mobile usage in Europe vs. Germany.
10A more general view on variations among countries in Europe with respect of being digitized economies is presented by [17, p. 27 f .].
11All subsequent research data on wealthy internet savvy investors is taken from [15].
12Includes all traditional branch based banks as well as online banks and online brokers, operating in Germany, irrespective whether the providers offer digital and/or brick & mortar services.
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