Many great words of wisdom and insights from some of the brightest, most innovative individuals on the planet - from the smallest of the ‘Digital Disrupters’ to the largest ‘Big Brand’ players – all competing in the US automated investment advice space.
One company that particularly intrigues me is Jemstep. Established as a Registered Investment Adviser (RIA) in 2008, Jemstep developed a D2C ‘robo-advice’ offering in 2013, just like a number of firms are doing in the UK. But – and here’s the rub – in the last year or so they’ve completely transitioned their business model, moving from a D2C automated investment proposition to focus on a B2B adviser-based technology proposition – Jemstep Adviser Pro.
There’s definitely a learning or two in this change of strategy for any UK firm currently looking at the viability of the D2C robo-route. You’ll quickly find:
- Customer acquisition costs are extremely high [read ‘not sustainable’]
- Without a trusted brand you’ll struggle [our own Altus consumer research in October more than backs this up]
- As bigger players enter the market, you’ll need to spend more to stand still, pushing out the date you can provide any sort of return to your venture capitalists (VCs).
But what else? What are the really important messages for advisory firms in the UK looking at the robo opportunity and wanting a slice of the action?
Well, if you think your new, shiny, proposition is innovative / disruptive, yet consists of the following:
- A strange name (you know the sort, a mash up of a couple of words to make a new word)
- A white label of another firm’s proposition, which to all intents and purposes is pretty much identical to every other firm that uses them – GIA, ISA, possibly (though not always) a SIPP, some risk-rated ETF portfolios, low(ish) charges (but not as low as the multitude of existing D2C propositions which are already finding it hugely difficult – save a few – to build any sort of scale)
- A pretty inflexible technology – one pre-built process, take it or leave it….
…then I’m sorry but I think you’ll be hugely disappointed in the outcome, and really need to think again….. unless of course you’re running it as a ‘not for profit’ side-line, simply to keep a few existing customers happy.
Quite simply, if the sum total of your ‘proposition’ is to ‘slap a logo on a robo’, then you’re not bringing anything new to the party, nothing that doesn’t already exist multiple times. No differentiation. No value proposition.
Yes, I accept these propositions will undoubtedly attract a small number of existing clients who can no longer afford ‘full fat’ advice fees. And perhaps even a few new clients attracted by the quirky name…but let’s face facts – you are unlikely to attract any significant volume of ‘robo’ clients, or sufficient assets, to build a profitable business, through a white label ‘me too’ proposition.
But - if you’re building a ‘robo’ business and proposition that:
- Is truly on the side of your carefully selected target customer, where the technology you use can be customised to their specific requirements
- Has a well-thought-through approach to each stage of the customer journey and experience
- Is goals-driven, not product driven
- Aggregates the customer’s wider portfolio
- Understands the role of social media engagement
- Uses behavioural psychology to enhance the user experience and increase conversion and retention rates
- Is integrated to existing systems, with single sign on capability
- Provides a true omni-channel experience, recognising that automation and adviser propositions are not mutually exclusive
- Uses technology to support and create efficiencies in the ‘full fat’ advice process, too
- Provides you with detailed analytics to improve your decision making
- Operates a ‘fast to market, test and learn’ approach – a ‘minimum lovable proposition’
- Has thought carefully about the value chain, your role across it, and the margins you can generate
- Primarily serves an existing customer base while diversifying to bring on new target markets / new clients / new channels to provide the necessary scale at lower acquisition costs
- And importantly, keeps one eye on the future, and developments such as Big Data, Artificial Intelligence, Blockchain……
…then I think you just might achieve what you set out to do.
I’d love to hear what you think – whether you agree or disagree – it’s good to challenge and debate!
And if you’d like to hear more about the US market, what’s working, what isn’t, and where next… or how to really create a ‘robo’ (simplified advice) proposition that’s right for your business – your own, unique digital ecosystem - do please get in touch.
* With huge thanks to Simon Roy, President of Jemstep, for his time last month… and this brilliant soundbite!
First published in FT Adviser 08.12.2015