How to compete with the robos

Since 2012’s Retail Distribution Review (RDR), financial advice has become more expensive and less accessible. Robo-advisory platforms have rushed in to fill the void, offering a low-cost, resource-light service. By mid-2017, around one hundred active robos were busy offering financial services.

However, while robo-advisors are definitely on the increase, they need to grow fast to turn a profit. Thus, many are currently focusing their time and money on marketing and customer acquisition. This gives IFAs an opportunity to leverage their established positions and adapt their business models to stay competitive.

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Win back revenue

Dormant back books, full of clients who could no longer afford financial advice post-RDR are waiting to be reactivated. Until now this was an unprofitable proposition for IFAs, but the advent of automated investment solutions can help reactivate lost customers and attract new ones. Our non-advised digital investment solution FinchTech, enables IFAs to meet robos head-on and compete for market share by offering clients access to automated online portfolios.

The benefits of a non-advised investment solution

While robo-advisors naturally appeal to a younger, more tech-savvy target audience – the bulk of the investment management community is made up of more senior individuals. This older demographic is not averse to using the right digital tools, but they worry about the longevity of robo and how it will cope with a ‘black swan’ event. A non-advised investment solution based on proven portfolio performance is therefore appealing. 

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That said, the tech-savvy millennials are obviously a highly valuable demographic to pursue too. These HENRYs (High Earners, Not Rich Yet) are worth targeting now. It’s a long-term strategy that could provide IFAs with lucrative investment potential in years to come. One things for sure, HENRYs will certainly expect to be able to invest online and review performance without having to pop down to the office of their local financial advisor.

Value add

A robo is a robo. It doesn’t have much more to offer than that. On the other hand, you can upsell IFA services and offer a range of value-adds to meet your customers’ investment needs.

Compared to the very nascent robos, IFAs have a lot of experience navigating financial crises and recessions. They are also far more able to package a suitable investment solution that fits with the investor’s true means – for example, matching a cautious investor with a balanced portfolio.

Download 'The IFA guide to surviving the robo revolution' now!

IFAs have a clear upper hand – but this superior position is at risk as robos spend more in order to increase their market share. To regain lost RDR revenue and clients, IFAs need to harness the benefits of non-advised solutions – and the sooner they do it, the better.