No, robo-advisors are not just a fad. Last year alone, the world’s fintech industry reached more than $31 billion (that’s US dollars) in investments. This has grown to an astounding US $122 billion over the past three years. Sure, this might bucket all of the technology advances occurring across financial services, but we’re already feeling the direct impact of the emerging world of robo.
What does that mean? Besides the fact that the fintech and robo industry are receiving more funding today than ever, it’s also changing the industry as we know it. For everyone.
With more innovation taking place in wealth management, there’s a dire need for professional participants to adapt to the changing landscape. But that doesn’t limit the impact to robo professionals and consumers only.
The Canadian investor was historically challenged to choose from structured investment solutions that used traditional ambiguous high-fee investing models. Today, with more digital innovation within the industry, the bar has been raised to meet the needs and wants of the customer and their expectations. Consumers are seeing more attractive solutions that are challenging convention, but the changes aren’t impacting consumers alone.
Canadian regulators are being pressed to keep up with the latest technological advances in the industry. This week, Advisor.ca reported how regulators in Canada are adapting to robo growth.
Now that digital wealth management solutions are no longer just the “up and coming” innovation flavour of the year, there is a push to keep the rules consistent for all advice-based investing business models, including robo-advisors.
Competition or Co-operation?
Robo-advisors are the driving force behind creating more competitive offerings. That means consumers will have access to an equal level playing field.
By offering a similar product to mutual funds and creating similar (or better) returns, robos are creating a need for industries and their professionals to raise the bar in order to continue to stay relevant. They’re forcing more transparency, lower fees and access to sophisticated wealth, but as Uncle Ben stated himself, “through great power comes great responsibility”.
We’re not exactly paralleling ourselves to your friendly neighbourhood Spider-Man, but what we are saying is that by using innovation to solve a problem in our space, we were able to not only mend the gap at the consumer level, but we also understood this to be our responsibility to solve a larger problem for the industry as well.
Robo technology might’ve first been noticed as a threat to advisors and wealth management firms during its initial entry into the marketplace. However, through its emergence it also shed light on the opportunity it presents as well, like the potential to form alliances in order to sustain efficiencies and stay relevant in the changing digital consumer space, and we’re willing to take on the opportunity. Last year, we announced our partnership with National Bank. You can read the press release here.
”We are thrilled to be entering into these agreements with National Bank, a truly innovative and historical Canadian bank. At Nest Wealth we know that digital wealth platforms can be a game-changer for millions of Canadians who are working hard to save and accumulate wealth. National Bank shares our singular focus on making the end-investor better off and we are excited to work with this great institution to expand the reach of Nest Wealth Pro and our other industry-leading wealth management solutions.” – Nest Wealth CEO and Founder, Randy Cass
A lot of wealth management firms are also reaping the benefits of robo alliances. They can use a technology to help them take a leap forward to reach a newer, wider audience without needing to build the technology itself. That’s why Nest Wealth Plus exists. It’s a robo solution that gives advisors the ability to maintain their practice with the convenience of an intuitive and streamlined tool that also lets them manage their business at their fingertips.
The opportunity doesn’t end there. Smaller shops can benefit from the upward trend of robos. As our technology continues to evolve, we understand the impact we can make on small to medium-sized businesses as well.
Take Group RRSPs for example. As Nest Wealth’s Randy Cass suggests, “Over 13 million working Canadians do not have access to a group RRSP plan, yet almost every employee would want an option to help them prepare for retirement. 51% of SMBs would like to provide this benefit to their employees, but traditional financial institutions have historically made it extremely complicated and difficult for them to open and run their own group plans. With Nest Wealth At Work, these companies can now easily offer their employees a path to financial well-being.”
With a lower cost Group RRSP solution, we’re enabling Canadian employers with the ability to retain and attract strong talent, as well as solve the obvious gap in their ability to manage their own group plans.
So the Technology is Here and it Isn’t Going Anywhere
Correct. It’s kind of like survival of the fittest. Canadian financial services can choose to adapt or choose to resist, but either way, the change will persevere.
That’s because robos are here to stay, and with more access to funding, we can expect not only a movement to better technology and shifts in current business models but shifts across the industry.
We’re really excited for that.