Proceedings of the International Conference on Applied Research in Management, Business and Economics
Year: 2019
DOI:
The Disruptive Potential Of Robo-Advisory On The Wealth Management Business Model Of Banks
Cam-Duc Au and Alexander Zureck
ABSTRACT:
We investigate the disruption potential of robo-advice on the wealth management market in Germany. The special focus on the German market intends to close the gap of scarcely existing literature for this target country. Our qualitative research approach consists of 13 conducted expert interviews with top-management representatives from the financial industry. The interview transcripts underwent a structured content analysis based on inductive and deductive categories resulting from a performed literature-review. The key findings indicate, that there are four major obstacles avoiding significant disruption in personal wealth management: (1) pending performance proof in market drawdowns, (2) misleading price-performance-ratio, (3) limitations in the affluent business and (4) the existence of the scaling-strategy-paradox. Our overall conclusion stresses the fact, that robo-advice is relevant for German investors and thus for banks to implement in their service offering. Although the digital service misses a long-standing track record and even may not be as cost-efficient as suggested, it already demonstrates disruption in the retail business. However, robo-advisors are technically not ready yet to meet investor needs of high net-worth individuals, which may be decisive due to an upcoming market consolidation. Scaling effects are difficult to achieve without collecting high investment volumes from the affluent business segment. Hence, current robo-advice-strategies on market are paradox due to their technical capabilities and strategic orientation on the retail market.
Keywords: automated investment advice; digital asset management; digitization; fintechs; robo-advice.