FinTech Innovation

Chapter 5The Industry's Dilemma and the Future of Digital Advice

“There is nothing permanent except change”

—Heraclitus (535–475 BC)

This chapter concludes the first part and discusses the future outlook of the industry, the puzzle of the digital revolution, the actions required to solve it, the transformation of Robo-Advisors into Digital-Advisors: Robo-4-Advisors and Robo-as-a-Service. Final investors take a progressively more central role in a personalized investment experience, incentive mechanisms adjust to favour fee-only and mitigate compliance costs. Digital engagement and cognitive analytics allow the new client visual to go live with Goal Based Investing principles and reinvigorate the original spirit of the industry: clients come first!

5.1 Introduction

Unquestionably, the mission of the industry should be the provision of investment services to individuals and families, with the goal of optimizing and fulfilling their financial well-being over time. However, business reality is not always aligned with this foundation. Private investors have found it notoriously difficult to make investment decisions, financial intermediaries have ultimately enjoyed an advantageous asymmetry of information with regard to direct and indirect conflicts of interests and the costs embedded in their services. Their placing power has exacerbated the product-driven aspects of traditional advice, steering the main focus away from clients' actual goals and risk tolerance. The economic incentives ...