Advisor market heats up

While the market for robo-advisors in South Africa is still in its infancy, competition is quickly heating up – in line with global trends.

According to Bloomberg, robo-advisors manage roughly $50bn of assets globally, a figure that is expected to skyrocket to more than $2trn by 2020. Yet, a 2015 report by The Boston Consulting Group puts the global value of “professionally managed assets” at $74 trillion in 2014.

Broadly speaking, robo-advisors are online tools that use software to guide investors to compile an investment portfolio suitable to their specific needs and risk profile, without the help of a traditional human financial advisor. This approach is meant to simplify and reduce the cost of investing, but may not be sophisticated enough to provide guidance with complex investment structures.

Locally a number of players participate in this space (SmartRand and Yellowtail’s Figlo come to mind) and Sygnia has also announced plans to launch a robo-advisor service.

Peter Armitage, CEO of Anchor Capital, expects all the major asset management companies to come to market with various iterations of a technology-based solution, including the likes of Sanlam, Old Mutual and Allan Gray.

“I think the one thing you know for certain is that the whole industry landscape is going to be very different in a year or two’s time. So it is a case of being out there and learning – seeing what others are doing, seeing what consumers want, what works for them [and] where their appetite is,” he says.

Anchor Capital has just been appointed as the asset manager to new robo-advisor service, Bizank. Bizank is majority-owned by its founders, including fintech entrepreneur Adam Oberem. Anchor has a minority stake.

Investors can invest a minimum of a R1 000 a month or a R10 000 lump sum with Bizank.

The whole process is managed online. Bizank would identify appropriate investments for the client in line with his or her risk appetite and invest the money in a range of Anchor products or a segregated portfolio, Armitage says.

Investors would be able to monitor the performance of their portfolios continuously and Bizank will provide updates to show whether clients are meeting their goals. Fees range from 1% to 1.25% per annum (excluding VAT) depending on the underlying investments.

Armitage anticipates that the offering would initially appeal to younger, tech-savvy type investors who are prepared to interact without human intervention.

“I don’t think this is going to have a material impact on the more traditional financial advisor-type space, with much wealthier clients. So I think it is going to be for people who embrace technology and the way it is changing the world and we would anticipate probably the 25 to 35 age group being the initial target market.”

The expansion and growth of the offering will be a combination of learning from local as well as offshore developments.

Armitage says South Africa typically tend to be three or four years behind the rest of the world and local participants can follow trends, new technologies and value-adds emerging internationally.

While he believes the number of clients signing up could be significant, he doesn’t expect it to make a material contribution to Anchor Capital’s assets under management for quite some time.

The expected profile of a Bizank customer is someone with between R10 000 and R100 000 to invest and who it still “early” in his or her investing career.

“I don’t think it is going to be massive numbers right up front, but it is a gradual process. I have got no doubt that technology will change the industry over time and we want to make sure that we are positioned for that growth whenever it happens.”