With South Africa’s poor retirement outcomes persisting, financial services organisations are increasingly looking to new distribution channels to engage consumers, encouraging them to plan for their retirement. There is clear evidence from across the investment world that technology led advice, “Robo-advice”, is gaining momentum. According to an estimate by research firm My Private Banking, the assets managed by Robo-Advisor services worldwide could be over $14 billion by the end of 2014, which is expected to rise to over $250 billion in the next five years, with over $200 billion worth of assets in the U.S. alone.

Passive investing is increasingly attractive to investors seeking personalised investments, at a fair cost. The rise of Nutmeg in the United Kingdom is a clear example. Launched as the UK’s first discretionary  investment management firm, it offers consumers self managed online investments. US Charles Schwab launched its fully automated Schwab Intelligent Portfolios in March, considered a strategic move in response to other investment advisory firms moving into the online investment space. The algorithm-based service has reduced eligibility criteria, opening up online investments to a broader market.

Until recently, portfolio management and financial advisory was performed by human interaction. The availability of improved technology means that Robo-Advisors are able to offer automated portfolio management with limited human interaction. The benefit of cost savings, increased consumer interaction and transparency make it an appealing investment channel for many consumers. There is the real belief that by making financial planning more accessible, robo-advice could potentially develop a nation of empowered investors.

“While Robo-Advice in South Africa is yet to make a huge impact, it would be naive to believe that financial services organisations here are not looking to implement robo-advisory platforms. The obvious attraction is opening up investments and retirement planning to a broader market. Cost savings and transparency makes it a highly attractive proposition,” explained Maarten Boddeus, Principal Consultant and Figlo Specialist, Yellowtail Business Solutions.

 “With financial services organisations concerned about the cost and speed of developing new channels, such as those offered by Figlo are highly attractive. Figlo is a multi-channel financial planning solution that enables banks and insurance companies to provide their customers with an up-to-date view of their finances at any time,” Boddeus explained.” “Consumers feel in control of their finances, they plot their retirement goals, determine their risk profile and time horizon, all can be reassessed at any given time. Really it’s investing made simple.”

Robo-advisory platforms provide investors with investment access to exchange traded funds, it is these funds that PWC predicts will double to $5tn by 2020, far outstripping the asset growth of traditional fund managers. “This is no longer the time for South African banks to rest on their laurels, robo-advice is without doubt a game changer. Financial Services organisations need to urgently consider developing and implementing their robo-advice strategies,” concluded Boddeus.