A few years ago, everyone in the industry was talking about robo and how it was The Next Big Thing. It was either going to save us or destroy us all.
In the wealth sector, fears spread that robo would put everyone out of jobs, while also causing worry in banks’ wealth groups that they’d lose business if they didn’t get a robo-advisor product, and quickly. What happened was a robo arms race, with everyone who had the resources to roll out a robo service doing so.
Fast forward to now. The big banks have all launched various robo solutions, but none of them have managed to secure any meaningful new assets or traction. (And, no, automatically moving existing small-wealth accounts into a robo account does not count as success. Sorry.) The lack of momentum has left the banks who adopted the technology disappointed.
So, what went wrong with robo? Why aren’t these big banks having success with new assets after pouring millions into home grown or outsourced robo solutions? Let’s take a look at 5 reasons why:
The Horror of Repricing Deposits
I have yet to meet a retail banker who embraces the idea of taking a $2,500 savings account that earns 300 basis points of net interest margin and moving it over to the wealth group where it can only earn 25 basis points of robo fees. That trade-off is seen as bad business, and it’s a key reason we’ve heard on why banks aren’t moving deposits over to robo.
Robo Launched As An Unintegrated Product
Many banks have put in significant resources to build up their online and mobile solutions. But some banks didn’t integrate these new robo offerings into their existing and readily available platforms, making the user experience of robo somewhat clunky and not directly ready for use. What happens now is that customers have to seek out and find the robo service elsewhere on the site or app just to enroll, when it should have been seamlessly integrated into that customer’s existing experience in the first place.
Barrier To Robo Entry Is Too High
Robo minimums in banks average about $5,000 (some are as much as $10,000), which is much higher than the offerings from any direct-to-consumer robo advisor, such as Betterment, which has no minimum investment requirement. As a result, folks with less money to invest have many non-bank options to choose from, thanks to the rise of fintech startups.
Marketing Hall of Shame
Some banks just ran ads announcing new products. The execution of it seemed like it was inspired by the Field of Dreams line, “If you build it, they will come.” Unsurprisingly, no one came, because there was no real insight, limited marketing support, and very little that was interesting about the creative product.
Robo Only Helps the Wealth Groups
For the big banks, the rollout of robo appears better suited to solving the small account problem in the wealth group rather than a real customer problem. Just solving a problem for the wealth group, and not for the customer, leaves out millions of potential new people using that service. The problem that now must be solved is, “How do we help the customer save and grow their money more effectively?” Unfortunately, most banks asked the wrong question, which is “how do I service small accounts?”
How To Improve Robo
Despite initial missteps, bank-offered digital advice still has the potential to deliver a valuable customer experience. Here are a few quick tips to keep in mind:
- For robo to succeed at banks, it needs to be driven by the retail and the wealth groups combined. It can’t succeed in a siloed environment.
- Deployment of robo must also be seamlessly executed through existing digital channels, and marketed in a way that speaks to the customer’s problem, with an easily understandable and compelling customer proposition.
- Consumers need to be moved from savings to robo to wealth at the right time and place based upon their needs, appropriate savings and investment vehicles, and the corresponding time horizon. Helping them move up the financial food chain easily and when the time is right for them is critical.
- Robo services can’t be set at minimums that only work for the bank; it has to mimic what the fintechs are doing, and doing very well: namely, getting customers in the door with very small balances, and then moving them up the value chain as balances increase.
- Finally, banks need to provide their customers with new, integrated solutions that serve the smallest clients and the emerging wealthy with the same level of respect that the fintechs give them. Just deploying robo in a vacuum, with no integration into other silos, cannot do that.
– Drew Sievers, CEO, Harvest Savings & Wealth Technologies
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