76% of Australian wealth managers are lowering their costs to compete with robo-advisers
Australian wealth managers are feeling the pinch as robo-advice adoption rates are on the rise among the wealthy. GlobalData Financial Services reports
Robo-adviser services are no longer the reserve of the retail segment, as Australia’s rich are increasingly open to digital channels and to spreading their fortunes across providers.
Data from GlobalData’s Global Wealth Managers Survey shows that Australian high-net-worth (HNW) investors now use an average of four different providers, as the uptake of automated investment services is increasing.
This has a significant impact on traditional players’ bottom lines. Not only are wealth managers losing market share to robo-adviser services, but these players’ low-cost business models are putting pressure on traditional providers’ margins.
Our data shows that eight out of 10 wealth managers agree that HNW clients are increasingly fee-sensitive due to the rise in robo-adviser services.
Accordingly, 76% of wealth managers in Australia (compared to 61% globally) indicated that they have lowered or are planning on lowering their fees to compete with automated investment services.
While price is an important factor in the advice selection process, an analysis of the drivers for and deterrents of automated services shows that wealth managers should not neglect other aspects. The two single most important reasons why Australian HNW investors opt for robo-advisers are a loss of trust in traditional advisory channels and a belief that these services yield similar or better returns than other options.
On the flipside, a desire to talk to a human adviser and the often still-limited investment range of robo services represent the two main deterrents.
Consequently, rebuilding trust to create better customer relationships has to be wealth managers’ main concern. As long as an impersonal algorithm enjoys greater levels of trust, any fee reductions are unlikely to entice investors.
In addition, highlighting a positive track record and the benefits of a wide range of investments – especially as ongoing market volatility calls for greater levels of diversification – will be critical in retaining clients in the current crisis-plagued environment.