Traditional Financial Institutions Challenge the Ideal and Reality of Intelligent Investment and Care

According to Forbes magazine, there may not be any Fintech sub-sector that can attract the interest of so many institutions and retailers as well as robo-advisors. The business of financial planning and personal investment affects large amounts of capital and most of the investors. Innovation in investment technology has caused fierce competition among startups, brokers, wealth management companies and insurance companies. Some of them are trying to grab business and some of them are reforming and innovating. However, with the intense competition, more factors need to be considered in this competition.

What is smart investment advice?

So far, smart investigators have become familiar with fintech observers. They are launched by a number of start-ups and businesses include automated planning of portfolios, automatic scheduled asset allocation, online risk assessment account rebalancing, and service applications for other digital tools, allowing low net worth individuals to be lower at assets below $10,000. Management expenses participate in investment and wealth management. Cost is one of the competitiveness of these services and is generally between 15 and 35 basis points of assets under management. At present, the famous intelligent search companies include Betterment, Wealthfront, Motif, and Folio, etc. The domestic financial puzzles, financial whale, and Miji all belong to this category of applications.

In general, smart investing allows more people—those who do not have enough investment confidence, or who can invest in assets and may not even reach the minimum requirements—to enter the market passively. Traditional wealth management companies and investment consultants charge management fees of 1% or more of the management assets. Intelligent investment consultants meet the investment needs of the young generation who are familiar with digital trends and can accept the Internet, provide them with economical and intelligent digital investment tools, or satisfy those who want more privacy and can independently control their investment portfolio. The crowd's investment needs. This may be a sign of an era—lower yields and lower long-term interest rates have also prompted investors to look for new strategies to manage their financial futures.

Smart Matching Arms

However, not only millennials or other younger generation users tend to favor digital investment tools. The latest report of ETrade Streetwise, the largest investment institution in the United States, pointed out that 25-34, 35-55, and 55-year-olds and older people form the main user group for intelligent investment advice. Traditional companies have also realized this and started to join this competition.

As far as providing smart agents for online agents, it feels like a natural extension of the field of electronic services. The first Internet bubble of the stockbrokers in the late 1990s has undergone a tremendous transformation, and most, if not all, have become Internet brokerage firms. More interestingly, traditional players such as insurance companies, asset managers, and wealth management companies have shown interest in smart investment. These companies are actively creating or acquiring robotic technology companies or working with them.

Recent strategic actions

The following list is the strategic layout of traditional players through the creation or merger in the past two years:

Northwest Mutual Acquires Learnvest, a Women's Financial Wealth Management Firm

Blackstone, Blackstone, a US bond fund management company, acquires wealth management startup Future Adviser

Invesco invests Invesco's merger and pension investment solution provider Jemstep

Vanguard Announces Smart Adviser Services

Deutsche Bank releases online investment platform maxblue

Charles Schwab, Charles Schwab, Releases Smart Waving Scwab Intelligent Portfolios

Fidelity Investment Group Fidelity Launches Smart Fidelity Go

ETrade Releases the Adaptive Portfolio

Challenges and considerations

The motives for traditional financial institutions to compete with smart buyers are obvious on the one hand, but they also contain many complex factors. The lower costs and digital conversions that have profoundly affected the financial services industry have become mainstream. For traditional institutions, the major strategic issues seem to have an impact on their current business.

For companies with large asset bases, their most thorny issue is the erosion of their costs, brand substitution (meaning that a new investment will reduce the customer, revenue, or market share of other products or services the company already has). If these companies turn to intelligent investment models and reduce the fees for managing assets of the same amount, they will essentially have to attract larger-scale basic management assets to obtain as much fee income as before. At the same time, we must invest in new technologies to support the development and operation of automation plans and digital tools.

While maintaining the profitability of these capital expenditures while maintaining profitability, then reducing expenditures becomes a necessary channel, and it is possible to take measures by reducing the sales force of financial consultants to achieve their goals.

On the other hand, the situation is even more complicated for companies that want to provide mixed services. These companies provide digital services brought by smart investment and at the same time maintain low-interference human advisory services. With these different tiered account services, different fee levels may be a smart strategy.

For these wealth management companies, providing intelligent investment services may be an opportunity game. These companies are highly dependent on the fee income of the "silent generation" and the "baby boomer generation". During the generational transfer of wealth (property inheritance), the account loss is not a small worry. In an era with very high yields and interest rates, the older generation may have earned a profit from traditional consultants. However, today's situation is very different. Companies must look at these waters carefully. They can't make traditional customers feel too much ahead of time, and they can't make young users think they are too backward. As younger family members start inheriting old assets, when smart care services may be an effective measure to keep asset management levels stable, it may need to establish a brand that is independent of other types of accounts.

However, for some very traditional and ultra-high-net-worth families, the robot's suggestions may not keep up with them. In this case, technical and digital tools can expand the power of human investment consultants and increase their work efficiency, free their time, and allow them to provide more personalized tracking services for these customers.

The competition between smart investment advisers, traditional financial institutions and smart investment advisers continues. Various companies will continue to consider an endless stream of trade-offs and then choose an appropriate entry strategy to compete.