In China, one of the difficulties that firms providing robo-advisory services face is client retention, Van Den Bergh said during Fund Forum Asia 2017 last month in Hong Kong.
He believes robo-advisory firms often struggle with the question of developing a portfolio the client actually needs, based on individual risk and return requirements, or giving the portfolio that would be more likely to retain them as clients.
Personalising a robo-advisory service, which could be done through gathering relevant data, may help with client retention, he said.
For example, firms may use natural language processing technology to analyse client communications. The data would include the words clients use to asses how they feel toward the service, which should help firms determine whether they should reach out to a client more often.
Data could also be used to monitor how many times clients check their portfolios. If portfolio checks are frequent, robo-advisory firms could contact the customer to alleviate concerns they may have and remind them to stick to the recommended portfolio.
Personalising portfolios
Another use of data is in personalising a robo-advisory client’s portfolio, Van Den Bergh explained.
Firms could obtain the data through the questionnaire that assess a client’s risk-return profile. However, Van Den Bergh noted that rather than having a typical standardised questionnaire, firms should give more time in analysing the complexity of a client’s financial situation.
Scenario-based questions, for example, may reveal clients’ attitude toward risk. In addition, purchasing history may also reveal a lot about their financial situation.
Analysis of the data may show changes in a client’s situation over time, which may prompt the robo-advisory service to also make changes to the client’s portfolio.
For example, if the clients’ purchasing history reveals that they bought a lot of diapers, that may indicate that they just had a child. The firm may reach out and recommend clients a portfolio that is in a lower risk level or an education fund, Van Den Bergh said.
“The good thing about China is that there’s a lot of data available, and some customers are pretty willing to share that with the larger institutions that we work with,” he said.
“So it’s not just based on your age or the wealth you have.”
Van Den Bergh added that Chinese investors have some investment biases towards a particular asset class, sector or stock that firms should take into consideration.
A client’s investment history is also important. For example, if they indicated that they have invested a lot in real estate and still have current holdings in the asset class, then maybe it does not make sense to give a client a portfolio that has exposure to real estate, he said.
If firms are able to utilise the data made available, they could “truly personalise the robo-advisor service, almost like having a private banking experience”, he said.
