Nowadays, technology develops faster than ever before and is increasingly being used in our everyday life.That’s why westand on the brink of the fourth industrial revolution. One of the economic sector that has been the most impacted by technological opportunities is the financialsector.Followingthe economic crisis of 2008, the financial landscape started to change, which resulted in client lossoftrust in established financial institutions.Thus, alargenumber of newentrants began offering clientfacing digital financial tools. Meanwhile, traditional wealth managers were toooccupiedby meeting regulatoryrequirements and were facing the crisis complexities, new types of firms saw an opportunity to leverage theirtechnologicalcapabilities for delivering fasterand cheaper investment methods to financial professionals. Indeed, technological financial firms, more knownunderthe term „Fintech“, have really taken offsince the financial crisis of 2008.
Table of Contents
INTRODUCTION
I. CONTEXT
II. SIGNIFICANCE OF THE STUDY
1. FROM AN ACADEMIC POINT OF VIEW
2. FROM AN ECONOMIC POINT OF VIEW
III. RESEARCH QUESTION AND OBJECTIVES
IV. STRUCTURE OF THE RESEARCH PROJECT
V. LITERATURE REVIEW
1. DEFINITION OF ROBO-ADVISORY CONCEPT
A. HOW IS A "ROBO-ADVISOR" OPERATING ?
AI. ONLINE QUESTIONNAIRE
AII. FUNCTIONALITIES OF ROBO-ADVISORS
AIII. ROBO-ADVISORS INVEST IN ETF'S
B. HOW TO CHOOSE THE BEST ROBO-ADVISORS ?
C. ADVANTAGES OF ROBO-ADVISORS
D. DISADVANTAGES OF ROBO-ADVISORS
VI. FACTORS DRIVING THE EVOLUTION OF THE WEALTH MANAGEMENT INDUSTRY
1. TRENDS OF THE WEALTH MANAGEMENT INDUSTRY
A. DEMOGRAPHICAL CHANGES
B. MILLENIALS AND THEIR CHANGING INVESTMENT BEHAVIOURS
C. TECHNOLOGICAL CHANGES
D. CHANGING INVESTMENT ENVIRONMENT
VII. ROBO-ADVISORS FROM A REGULATORY POINT OF VIEW
1. MIFID II AND IMPLICATIONS
VIII. RESEARCH
1. OBJECTIVE
2. RESEARCH PROBLEM
3. RESEARCH QUESTION
IX. METHODOLOGY
X. MARKET RESEARCH OF THE ROBO-ADVISORY AND FINTECH INDUSTRY
1. FINTECHS IN GERMANY
A. DEFINITION OF FINTECHS
B. SIZE OF THE GERMAN FINTECH MARKET
C. CONCENTRATION OF THE GERMAN FINTECH MARKET
D. SEGMENTATION OF THE GERMAN FINTECH MARKET
2. ROBO-ADVISORS
A. GLOBAL ROBO-ADVISORY MARKET SIZE
B. U.S ROBO-ADVISORY COMPANIES CHARACTERISTICS
C. RED MARKET OCEAN : GERMAN ROBO-ADVISORY MARKET
CI. CONCENTRATION OF THE GERMAN ROBO-ADVISORY MARKET
CII. SIZE OF THE GERMAN ROBO-ADVISORY MARKET
CIII. SELECTION OF GERMAN ROBO-ADVISORY PLAYERS & COMPARAISON CRITERIAS
XI. ROBO ADVISORS FROM A STRATEGIC POINT OF VIEW
1. POTENTIAL CLIENTS OF ROBO-ADVISORS
2. STRATEGIES FOR ROBO-ADVISORY PLAYERS TO INCREASE THEIR CUSTOMER BASE
3. STRATEGIC ALLIANCES
A. PARTNERSHIPS
B. SELLING THE TECHNOLOGY
C. DEVELOPING IN-HOUSE ROBO-ADVISORY CAPABILITIES
XII. LEVEL OF ATTRACTIVENESS OF THE WEALTH MANAGEMENT INDUSTRY
1. INTRODUCTION AND DEFINITION OF THE CONCEPTS
2. PRESENTATION OF PORTER’S FIVE FORCES FRAMEWORK
A. PRESENTATION OF THE RANKING MODEL
3. OUTCOMES OF PORTER’S FIVE FORCES FRAMEWORK
A. THREAT OF ENTRY
B. RIVALRY BETWEEN ESTABLISHED PLAYERS
C. POWER OF BUYERS
D. POWER OF SUPPLIERS
E. COMPETITION FROM SUBSTITUTES
XIII. INTERVIEWS
1. BANKS
2. CONSULTANT FIRM
Research Objectives and Core Themes
This thesis examines the role of automated investment platforms, known as robo-advisors, within the German wealth management sector, evaluating whether these technologies represent a competitive threat or a strategic opportunity for traditional financial institutions.
- Evolution of the wealth management industry and the impact of technological disruption.
- Competitive landscape analysis using Porter's Five Forces framework.
- Strategic assessment of in-house development versus partnerships for traditional banks.
- Analysis of robo-advisor target demographics, specifically Millenials and the "re-wired" investor class.
- Regulatory challenges posed by MiFID II in the context of automated advisory services.
Excerpt from the Book
A.II) FUNCTIONALITIES OF ROBO-ADVISORS
Althought, all the robo-advisors present different features, they generally offer the following common functionalities:
Account consolidation : This function of the robo-advisor consists in showing an overall view of the client’s financial situation.
Deposits and automated tranfers : this type of service allows the client to make financial transactions from one bank to another.
Portfolio rebalancing : this is the process of automatically selling or buying assets that are underrepresented or overrepresented in the portfolio relative to the strategic allocation of assets.
Tax loss-harvesting : is the practice of selling an asset that has experienced a loss. By „harvesting“, meaning realizing the loss, investors are able to offset tax on gains and income.
Reinvestment of the dividends : is a practice that allows the investor to reinvest his dividends by buying new shares of an existing portfolio.
Presentation of reports : Some robo-advisors are featured with reports which gives the client an analysis of relevant data of his investment.
Financial planning: this feature assess the investor’s actual financial situation and his future financial situation.
Presentation of investment scenarios : this method considers the chances of obtaining a certain return and attaining client’s obective, this being possible by analyzing the occurrence of possible events. Genreally, the robo-advisor present three possible investment scenarios including the pessimistic, optimistic and a scenario that has chances to most likely happen.
Summary of Chapters
I. CONTEXT: This chapter highlights the disruptive influence of technology in the financial sector post-2008 and introduces robo-advisors as a key driver of change in the investment landscape.
V. LITERATURE REVIEW: This section defines the technical and functional components of robo-advisory platforms, detailing their operating models, the use of ETFs, and the pros and cons of automated advice.
VI. FACTORS DRIVING THE EVOLUTION OF THE WEALTH MANAGEMENT INDUSTRY: This chapter explores demographic and technological shifts, emphasizing the rising influence of Millenials and the changing investment expectations in the digital age.
VII. ROBO-ADVISORS FROM A REGULATORY POINT OF VIEW: This section examines the regulatory implications of MiFID II and the broader European oversight of Fintech entities.
X. MARKET RESEARCH OF THE ROBO-ADVISORY AND FINTECH INDUSTRY: This chapter provides data on the Fintech ecosystem in Germany, focusing on market size, firm concentration, and comparative analysis of key players.
XI. ROBO ADVISORS FROM A STRATEGIC POINT OF VIEW: This analysis focuses on client segmentation and the strategic decisions institutions face regarding partnerships, technology acquisition, or in-house development.
XII. LEVEL OF ATTRACTIVENESS OF THE WEALTH MANAGEMENT INDUSTRY: Utilizing Porter's Five Forces framework, this chapter assesses the competitive threat posed by new entrants against established firms.
XIII. INTERVIEWS: This final analytical chapter presents the perspective of industry experts from banks and consultancy firms regarding the future of automated investment advice.
Keywords
Robo-advisors, Wealth Management, Fintech, Germany, Investment Strategies, MiFID II, Portfolio Rebalancing, Digital Transformation, Millenials, Asset under Management, Porter's Five Forces, ETFs, Automated Advice, Financial Technology, Strategic Alliances.
Frequently Asked Questions
What is the primary focus of this research?
The research evaluates the impact of robo-advisors on the German wealth management industry and determines whether these automated platforms pose a competitive threat or offer strategic opportunities to traditional firms.
What are the core thematic fields covered in the work?
The work covers technological evolution in finance, market segmentation, the role of regulatory frameworks like MiFID II, and strategic business models for wealth managers in the digital era.
What is the central research question?
The core question is: "Robo-advisors: Opportunity or threat for the german wealth management industry?"
Which scientific methodology is employed?
The author uses a qualitative approach, combining literature review, industry market research, the application of Porter's Five Forces framework for market analysis, and empirical data gathered through expert interviews.
What topics are discussed in the main body of the text?
The main body examines the definition and functionalities of robo-advisors, demographic shifts among investors, the competitive environment in Germany, and strategic pathways for traditional banks to integrate or compete with Fintech.
Which keywords best characterize this work?
The work is defined by terms such as Robo-advisors, Fintech, Wealth Management, Digital Transformation, MiFID II, and Strategic Alliances.
How does the author define the "phygital" approach mentioned by interviewees?
The "phygital" model describes a hybrid strategy that combines the scalability of digital technology with the added value of human intervention in the advisor-client relationship.
What conclusion does the author reach regarding the "threat" of robo-advisors?
The author concludes that robo-advisors are currently highly dependent on the established market structure and are not yet disrupting the entire industry, suggesting a shift toward hybrid partnership models rather than total replacement.
- Citation du texte
- Kevin Schmit (Auteur), 2018, Robo-advisors. Opportunity or threat for the german wealth management industry?, Munich, GRIN Verlag, https://www.grin.com/document/453201
