Robo-Advisory in Wealth Management

Cost-Income-Ratios and Robo-Advisory – Why Wealth Managers Need to Engage with Robo-Advisors

In the third edition of our series on Robo-Advisory in Wealth Management, Deloitte takes a more detailed look at the impact of Robo-Advisors’ cost structures on the Wealth Management industry and examine the options Wealth Managers have to make use of recent developments in the market to achieve cost benefits.

Robo-Advisory gained momentum in Europe over the past few years, but how can Wealth Managers participate in the Robo-Advisory market in a profitable manner?

In order to answer this question Deloitte compares cost-income efficiencies of Wealth Managers and Robo-Advisory firms, and then examines the main cost-saving drivers of Robo-Advisory service offering. Analysis shows that Robo-Advisors operate at much lower personnel and operational expenses which is, by comparison, improving their Cost-Income-Ratios tremendously. The leading edge advantage of their business model is the high degree of digitalization, which would bring about a real enhancement to existing offerings of traditional Wealth Managers.

Furthermore, three options for Wealth Managers to enhance Cost-Income-Ratios with Robo-Advisory are presented. Once a Wealth Manager understands the potential generated by adding a Robo-Advisory offering to the advisory business, it is important to analyze which specific needs a Robo-Advisor can address and what would be a best-solution for implementation.

This is why Deloitte has developed a modular concept that facilitates a well-prepared analysis and an approach that is tailored to the individual situation of each Wealth Manager.

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