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We rarely hear the term “robo-advisory” in the CEE region. In western markets such as the US, however, it has grown into a well-established industry during the last decade, making American robo-advisory platforms such as Betterment or Wealthfront household names. This does not mean that the CEE is without its success stories in robo-advisory: Finax, a Slovakia-based platform has made quite a name for itself in the last years.
In our current article, we highlight the benefits that robo-advisory can bring to the advisory process and then briefly present Dorsum’s own robo-advisory solution, Easy Invest.
New Challengers in the Wealth Management Industry
Robo-advisory is one of the most disruptive innovations in Wealth Management in the past decade which made low-cost and safe investment advice widely available and at the touch of our fingertips. Robo-advisor solutions leverage client information and algorithms to construct automated investment recommendations often made available through online and mobile channels. This client information can be anything from risk appetite and liquidity constraints to goals, values and beliefs, and various other preferences. The amounts are invested in portfolios—usually consisting of passive instruments (ETFs or funds)—that are built around these client preferences.
An already fast-growing industry that has reached $1.5 trillion in AUM by the end of 2021 based on Statista’s estimates, robo-advisory has seen a massive surge during the pandemic when a wave of new digital investors flooded the market. Despite the overwhelming success of recent years, it is unclear whether robo-advisors can fully eliminate the human element from the investment advisory process. There seems to be a degree of scepticism regarding this issue within the industry as well, as many providers are opting to offer hybrid solutions instead of full-on automatization, combining robo-advisory and traditional investment advice.
Dorsum shares the view that human interaction will remain an integral part of the advisory process going forward, but also understands the added value and cost-effective operation that robo-advisory can bring to the table, as well as the market demand. Building on these notions, we envisioned a hybrid robo-advisory tool that does not aim to replace the traditional advisory process. Instead, it supports the work of investment managers by streamlining their advisory process, improves the client experience via straightforward, preference-based recommendations and a user-friendly front-end, and at the same time seamlessly integrates into our existing Wealth Suite software family.
With the launch of our robo-advisory product Easy Invest, we can finally say that we have succeeded in realizing this vision. Easy Invest functions as a module for our client-facing Wealth Portal portfolio management application, allowing the user to create an investment portfolio that perfectly suits them in just a few simple steps.
Just 6 Steps to a Secure Investment
Easy Invest guides the user through the following 6 steps, collecting all the necessary information needed to create their portfolio.
- Choosing a Goal: In the first step, the user specifies their goal for which they want to invest. They first select a goal category (such as “Big Spending” or “Retirement”) where they have the option to add a name to their goal, then specify a timeframe within which they would like to realize their goal, and finally enter the amount they would like to reach.
- Setting the Amount to be Invested: The user specifies the amount they want to invest. We help with the decision by showing a visualization that illustrates how the selected amount is able to grow over the years. A warning can be set by the administrator that indicates if the selected amount is too large relative to the customer’s liquidity.
- Selecting a Risk Level: Dynamic animated graphs help the user choose their desired risk level. The selected level must not exceed the user’s previous MiFID result.
- Assessing Belief-Based Preferences: In this step, the application suggests various topics that the user can decide if they are interesting or important to them. These can range from trust in technology companies, to support for green energy use or the development of emerging economies. The system will then construct the user’s portfolio from investment vehicles that align with the selected views.
- Portfolio Overview and Customization: This step gives the user a comprehensive overview of the portfolio built based on the information they provided. They can see its distribution by region, currency, sector, risk and asset type. More experienced investors can even make adjustments at the asset level.
- Finalizing the Portfolio (with optional advisor approval): In the last step, the user has the option to run the recommended portfolio by their advisor or proceed without approval. Lastly, they receive the final list of assets to be invested, where they can read and agree to the terms of the offer to finalize the process.
By going through these steps, the client is able to create a portfolio—in a few minutes and without fuss—that fits their preferences, even without advisor oversight. For peace of mind, three additional functionalities are available at each step of the client journey that help the user understand the process and make the right decisions: a chatbot, an investor’s handbook and the ability to contact their advisor. The latter, plus the option to confirm the portfolio with the advisor in step six achieves the hybrid form of operation that, in addition to the advantages of robo-advisory, allows the monitoring of the investment process on the advisor’s side and provides security via advisor contact on the investor’s side.