Advice goes virtual:how new digital investment services are changing the wealth management landscape

Juan Carlos Lopez, Sinisa Babcic and Andres De La Ossa
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Juan Carlos Lopez: EY U.S.
Sinisa Babcic: EY U.S.
Andres De La Ossa: EY U.S.

Journal of Financial Perspectives, 2015, vol. 3, issue 3, 156-164

Abstract: The emergence of a new group of digital wealth management firms offering automated investment advice services has quickly become one of the most frequently debated topics in the industry. Comparisons are being made to the travel industry of the 1990s, when the travel agent model lost ground to online services such as Expedia, and some media outlets and analysts are predicting that the emerging start-ups will revolutionize how wealth management advice is provided. Yet others have discounted and labeled this “robo-advisor” movement as unproven and believe its solutions are no match for human personalized investment advice. In this context, we wanted to explore these new firms to understand the innovations they are offering and their aspirations for the future and answer some of the questions many in the industry are asking. Are these firms going to challenge the traditional wealth management model and change the industry landscape? Is there a large enough market for their services beyond the young, tech- savvy client segment they have attracted so far? And, if the underlying changes (e.g., client experience, new potential client segments) are permanent, what should traditional firms do? This report presents our insights and perspectives based on numerous interviews and discussions with senior executives across the industry, including traditional wealth managers and digital entrants, as well as secondary market research. Our key findings are as follows: digital entrants use a combination of simplified client experience, lower fees and increased transparency to offer automated advice direct to consumers; the new models have the potential to make advice for the mass market feasible at last; the changes digital firms have introduced are here to stay, so traditional players need to determine if and how they want to approach them. In summary, our view is that the emergence of digital entrants into the wealth management space will indeed change the industry in several ways. This will ultimately benefit new and existing investors alike by providing better and more affordable products and services through an improved client experience.

Keywords: Digital; wealth; management (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Date: 2015
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