Robo Advisor Market 2020 – Challenges in the wake of the Corona Crisis

The technology and regulatory provider and robo advisor investify has set itself the task of supporting banks and insurance companies in digitalisation and customer retention. The focus is on solutions for the digitalisation of investment in the securities sector. In a series of interviews with various robo advisors, CEO Dr. Harald Brock explains the facets of investify’s business model and the role that partnerships play. He also shares his view on the opportunities and risks posed by the Corona crisis.

Hello Mr. Brock, what exactly does investify do in a maximum of two sentences?

First of all, our focus: investify TECH (B2B) was created as a technology and regulatory provider to solve the current challenges in the investment business with a platform for banks, insurance companies and asset managers. In addition, digital asset management or a robo advisor in the direct client business is offered under the investify brand (B2C).

What is investify’s investment philosophy?

Here we differentiate between our B2B and B2C offerings. In principle, investify offers asset management in the B2B business as a white label – as well as all other services of the investify iP3 platform. Together with the respective B2B partner, our portfolio managers agree on how the investment philosophy should be individually designed. This can be very heterogeneous. A private bank with a retail offering, for example, has different ideas and requirements than an institutional investor – as you can easily imagine. Some of our clients also have very high demands on the sustainability of the portfolios, which we of course also take into account in asset management or in the implementation of the portfolios. For example, we have developed a very nice offer in cooperation with Pax-Bank: www.pax-investify.de

A unique selling point that makes investify’s philosophy clear is certainly the application of the mass customisation approach. What is behind this? Fewer and fewer end customers want off-the-peg services. This applies to their trainers as well as to financial services or their portfolio. investify consistently addresses this customer need and creates personalised financial services for B2B partners, but also in the B2C business. Through this, we achieve, for example, a higher level of customer satisfaction in general, more customer interaction in concrete terms and, finally, a higher willingness to recommend. We make the necessary processes very simple for our partners and clients through our fitting algorithms, such as the selection of thematic investments within the framework of a core-satellite approach. This is where we lead the market. In our own B2C offering, for example, more than 20 thematic investments are available to our clients. Frequently chosen themes are cyber security, ageing populations, gold and robotics. We are able to launch new thematic investments at very short notice and can thus react to lucrative trends faster than the competition. For example, during the crisis we launched the two contrasting variants (Still) Stay@Home and Oldschool Behaviour (Corona Recovery Basket).

Which target groups does investify address with its product range and how many AuM and customers do you have in the respective segment?

In the B2B business, investify targets financials (banks, insurance companies, asset managers, brokers, etc.) and non-financials (e.g. media houses, comparison portals and technology companies). In both areas, investify has been able to conclude new cooperation agreements with renowned partners in recent months. The platform approach enables us to serve both small and large B2B partners with an excellent product and at attractive conditions. In summary, this means that we are the first choice as a digitalisation and regulatory partner for a broad target group.
In the B2C business, our digital asset management is suitable for very wealthy clients as well as retail clients. Our fitting algorithms also ensure that we can offer unique individuality to those clients who, for example, have little knowledge and experience with financial services.
For us, digitalisation and our platform strategy mean that we do not have to think very rigidly in terms of specific client groups.

What does investify’s service cost private clients with an investment volume of EUR 10,000 and how competitive are you compared to other robo advisors and traditional asset managers?

My impression is that a mistake is currently being made in the market – also in various comparative tests. Too often, the focus is only on the price. But what good is the cheapest offer to a customer if the performance is poor? We, on the other hand, focus on quality and charge our B2C clients a fair price for this quality of currently 1% (from € 100,000 investment amount 0.8%). In the real money test (brokervergleich.de) of the last months and years you can see that we have an excellent performance after costs there – nothing else counts for us. It is not the price, but the relationship between price and performance that is decisive.

In B2B business, by the way, each of our partners determines independently what price they charge for the joint service.

What is your investment strategy and risk management?

investify pursues a strategic long-term investment approach in its own B2C business. This assumes that short-term strong price fluctuations will recover in the medium to long term. Even with a view to the effects of the Corona pandemic, we fundamentally assume that the markets will behave similarly to the past and eventually return to profitability.

To implement the allocation of our underlying investments, we draw on the expertise of BlackRock Aladdin and rely on multi-asset portfolios in our underlying investments.

The investify underlying investment is an inherently optimised portfolio. Quantitative screening continuously assesses risk positions and changes in the global economic situation.

There are now many providers of robo advisory, B2B as well as B2C. How does investify differentiate itself, i.e. what exactly is your USP?

First, let’s talk about our B2B offering: We are not merely a provider of robo-software. That would be too short-sighted for the market. Rather, we provide our clients with a white-label platform that can be used digitally and hybrid, i.e. also in combination with personal advice. In addition, we provide various investment solutions based on our platform. These include digital asset management, robo-advisory solutions as well as investment advisory and execution-only services. This comprehensive spectrum enables investify to clearly differentiate itself from the competition. In addition, we are a regulatory provider. This means that our clients can outsource regulatory duties of the investment business to us – we take over this burden so that our partners can concentrate on the essentials, namely the client.

Another unique selling point is that we offer customisable products. This applies equally to B2B and B2C business. Our range of topics, for example, is unique in the market.

What (marketing) strategy do you use to attract new customers? What role do partnerships play?

Partnerships are a top priority in our business model. Our goal is to attract more B2B partners from different industries and sectors (banks, insurance companies, asset managers, media, etc.). With their different characteristics, they can all benefit from the network and scale effects of our platform, each in their own way.

In which business area do you see the greatest growth potential? Which areas would you like to focus on in the future and which areas would you like to expand your business with?

Our growth path lies in the B2B platform business. Based on our business model, AuM growth is just as important to us as growth in licence revenues (SaaS). Together with our customers, we design the platform solution so that it fits the respective strengths of the B2B partner. This means that for one partner, the growth potential may lie in savings contracts on the basis of a retail case. For another, e.g. from the affluent or private banking segment, the growth path may lie in digitalised asset management. We see that we as a company can generate growth for our partners through a strong modular platform, which is offered in the white label, in each case in a very individual tailoring. Regulatory issues are becoming increasingly important, where we act as an outsourcing service provider and leverage the potential released by our partners, who can focus on their core competencies.

How has the Corona crisis affected your business so far? What are currently the biggest challenges for you?

Fortunately, we were very successful in sales before the crisis – as a result, we have a very good workload until the end of the year and can do without short-time work. We believe that the crisis confirms our business model: Digitalisation and outsourcing of regulatory activities are becoming increasingly important in the financial sector – also because of the consequences of the Corona crisis.

How has the Corona crisis affected your clients’ returns? How does this compare to your competitors?

Our client portfolios were also affected by the strong distortions on the financial markets in February and March and could not be completely protected from them. In April, however, they benefited from the rising stock markets and made significant gains. In general, we and our clients have come through the crisis better than the vast majority of our competitors – our focus on quality has literally paid off.

What medium to long-term risks do you expect the Corona pandemic to pose for you and the robo advisory market in general?

We and our B2B partners hope that the crisis will not permanently paralyse the already weak securities business in Germany.

What opportunities could arise from the crisis?

The crisis has created an even stronger interest in digital and smart products. This creates further opportunities for providers of digital products – which we want to take advantage of.

The interview with Dr Harald Brock first appeared on Bankinghub. Here, various robo advice providers were interviewed about the current situation. You can access the survey and the interview series here.