Robo-advisors have become kind of “boring” since they have been a Fintech sub vertical that is traditionally discussed at conferences, events, and that incumbents have embraced more than any other vertical (after payments). Stakeholders are not listening that much to innovations out this sub vertical and at Daily Fintech we see less interest from our incumbent clients for thought leadership services in the Robo-advisory subsector. Their clients in turn don’t need anymore to be educated about where “the puck is heading” in the space. M&A in the subsector is subsided and a few large players own most of the market share at least in the US (Vanguard, Blackrock, Charles Schwab), Europe and Asia are integrating these hybrid services in all sorts of ways. As Paolo Sironi pointed out in his book Fintech Innovation: from Robo-Advisors to Goal Based Investing and Gamification they are neither robos nor advisors (Read more about this book in my review).
I view robo-advisors these days as the stepping stone towards a world that moves from narrow AI to general intelligence AI in investment management.
Whether they are standalone, from brokerage businesses, from ETF issuers, from asset managers, from banks, they have been “selling” simple or engaging UX, low fees, low minimums, and maybe tax efficiency. They have been less successful as distribution channels because their customer acquisition costs remain extremely high, they have proven to have impacted overall financial education (yet), their risk-adjusted actual (not model) performance has not been their strength and there has been remarkable opaqueness with regards to their reporting or benchmarking, their personalization-customization focus is recent and when I talk to such ventures (Investglass, Alpima, Marketsflow) they have not yet hit the “tipping point” that will lead to adaption of these more “sophisticated” services at scale. We will be discussing these topics and more this week in London at the 3rd annual Robo-investing event (the only dedicated one). If you are interested in attending, please contact me directly firstname.lastname@example.org
Another way to bring robo services to market
We are all familiar with standalone robo services of all sorts, and the integration of robo-services from brokers, ETF issuers, asset managers, banks, and social platforms. Will business media and investment AI, be the new robo-trend? Several sentiment analytics and NLP startups have already taken this approach in bringing their services to market. Kensho, Amareos, and Sentifi come to mind immediately. I even had subscribed to the Kensho-CNBC partnership service for a while. And I know of Sentifi’s Pulse product for media. However, I view these ventures more in the space of alternative and Big data, rather than in the robo-advisory core business. Of course, alternative data could be integrated with robos and this is a topic I have looked into in the past (What Data feeds your robo-advisor?) but remains nascent.
I believe that Swanest is the first robo-service that has pivoted its offering and the way it brings to market and has chosen to empower DIY investors through a partnership with a business media company.
Swanest came out of the Nest’up Belgium accelerator in 2014. The four Belgian co-founders at first aimed to position themselves somewhere in the middle as a brokerage platform which guides clients to create their own ETF-only portfolios for a flat fee. I first met Silvan Schumacher, one of the founders, at SIBOS 2016 in Geneva. Just around the time they received their first funding and got the approval from both the FCA and the Belgium regulator. We have always kept in contact as Silvan is active on social media in the space.
Just before Christmas Swanest launched its online Investment Assistant for business media with De Tijd and L’Echo. Mediafin is the publisher of these leading business newspapers De Tijd & L’Echo in Belgium, with a strong focus on entrepreneurship, financial markets, and politics. The Mediafin newspapers have grown steadily since the introduction of a paid for model on its digital platforms eight years ago.
This is a new positioning and a new way to distribute Swanest’s services. Catering to DIY investors that are subscribers to business media platforms, Swanest offers several tools and capabilities.
The Market Data Tooltip allows you to hover over any stock (e.g, Tesla), ETF or mutual fund and get relevant content that helps in investment opportunity discovery or risk assessment.
The investment assistant helps the users in build, analyze and optimize investment portfolios. More or less what SigFig set out to do initially for free in order to onboard customers. But realized that conversion is difficult and CAC costs too high. Swanest is starting with an existing revenue generating user base from MediaFin and is of course, offering independence and a large universe of asset choice to users which is not the case with other offerings who are pushing select ETFS, funds etc.
The Portfolio Tracking capability allows users to track and manage portfolios on the business media website. That allows the business media platform to contextualize the content “pushed” to each user.
This has the potential to become the next generation of MarketWatch or YahooFinance. Swanest’s offering uses Machine learning to personalize the media content to each user and assist in the entire investment process – from discovery to optimization of asset allocation and risk management.
Swanest has designed its offering in a modular way and delivered through APIs. So online business media companies can white label and Swanest can continue to innovate in terms of their ML algorithms and the end-user capabilities.
Efi Pylarinou is a Fintech thought-leader, consultant and investor.
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