How to Launch a Robo-Adviser: 6 Convenient Lessons We Learned

by Walter Peczon, EVP of Velox Clearing

Does your business need to expand its financial services offering? Whether you’re a broker-dealer or a registered investment adviser, one tangible product you must consider is a Robo-Adviser to become more competitive and relevant in today’s marketplace.

Through a well-developed strategy, the successful launch of a Robo-Adviser relies firmly on distinction and innovation. There are multiple approaches to creating your own Robo-Adviser, but it is prudent to understand the benefits and drawbacks of each tactic.

Today, there are a large number of new entrants in the market – all of whom have identified their differentiation within the marketplace. As more investment advisers and brokerage firms see the opportunities with online portfolio management platforms, there is enough room for these players to repeat mistakes from the original disruptors.

In this article, we will go over what we learned from assessing our customer base, why Robo-Advisers are much more than a popular business model, and who should be involved in the development of a new Robo-Adviser.

Lesson 1: Objectives – The Goals, The Why, and the Strategy

In general, a Robo-Adviser is an online financial adviser that delivers accessible solutions through mobile or PC-based platforms. The first thing to consider when building your Robo-Adviser is to assess how you will set yourself apart from the competition, and how to generate new streams of revenue.

Before you take a leap and deploy your resources for this project, there must be an understanding of how this application serves your audience:

  • Does it serve a competitive advantage?
  • How can it benefit your ideal customer?
  • What are your business objectives for this product?

Once you have identified the demand for a Robo-Adviser, only then can you leverage the resources necessary to start the project – this process we can refer to as “the why” for your product.

Launching Robo-Adviser software is only the first step to success. Reaching out to new customers and improving the loyalty amongst your audience demonstrates that your business is adaptable. To bring your business online and capitalize on your new Robo-Adviser, take your time to work on your launch plan.

Forge a strategy that tells a story about your brand, educate your audience about your product, and excite your customers to live through your Robo-Adviser.

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Lesson 2: Budget – The Costs to Build A New Product

Consider the expenses in building a new Robo-Adviser platform. These include important elements such as software, devices, storage, and the talent needed to build the software.

At a minimum, you will need a small yet highly-efficient development team consisting of a designer, a developer, a product specialist, and a project manager to execute your vision. Whether you employ an in-house team or choose to outsource talent to produce the app is another strategy on its own.

If you haven’t done so already, consider partnering with an industry specialist who gets both the investment management side of the business as well as the technology side.

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Lesson 3: Talent – How to Hire the Best and Brightest

Hiring an in-house team or outsourcing talent to produce the software depends entirely on your vision and your business objectives. Whether through consultants or former associates, being able to tap into industry experts for advice and feedback can be good for the growth of your product.

Often times, they have a perspective on how to solve a problem but might want to consult other experts utilize other expertise, skillset, or garner a fresh opinion. This process may involve a deep strategy session, stakeholder meetings, and an action plan that fleshes out the program.

Having access to a dedicated development team can enable you to get your project completed, tested, and deployed in less time. Moreover, an in-house team can build the application while collaborating with your employees on feedback or education.

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Lesson 4: Software – Finding the Right Tools for the Job

From algorithmic trading to long-term investing, Robo-Advisers can serve a breadth of capabilities. Because of modern technology and the growth of financial intelligence, the demand for better financial services has driven firms to provide more accessible digital advisory.

Algorithms, functionalities, and digital experiences are the vital touchpoints for your Robo-Adviser. These factors not only let you stand out from the competition but serves a greater purpose for your customers.

Once you figure out a working system and draft a project timeline for your business, it’s time to focus on setting up trading capabilities and connecting your frontend to an OMS/EMS and the back. This direction works for those who have a reliable development plan site and an existing relationship with executing broker or a clearing firm.

Lesson 5: Marketing – Driving Interest to Your Roboadviser

In order to successfully sell a Robo-Adviser to your consumer base, your product must have an explicit and distinct place in the minds of all potential customers. Investors have had vastly increased information and choice in the past 10 years for financial services – this means that a clear product identity that highlights the benefits to your potential customer must also deliver a unique experience compared to other industry entrants.

First impressions matter to any business, and that includes the experience of your customers. For Robo-Advisers, serving the needs of your customers should be on your top priority list. Here are a few suggestions as to how Robo-Adviser s can better provide for their customers:

  • Enhancing the Simplicity of The Platform
  • Easy Set-Up of The User Profile (Customer Information, Bank Integrations, Faster Execution, Trade Analysis Reports)
  • Ongoing Management
  • Optimizing the Tax Experience
  • Customer Service Availability
  • Simplicity of Selecting Funds Another factor in building a successful Robo-Adviser is consumer recognition. Often times, when customers are researching new financial tools they have an interest in, they usually turn to reviews, testimonials, and feedback on the product. They seek a differentiating product not currently found on the market, align with their goals, and delivers compounding value.

Lastly, a successful Robo-Adviser carries many tools in its toolbox, which includes the features it delivers to its users and prospective customers. Since most Robo-Adviser s are much more cost-effective than traditional in-person financial advice, a great Robo-Adviser must stand out by showcasing other benefits other than pricing.

Features such as portfolio rebalancing, tax-loss harvesting, personalized retirement plans, or fractional shares are benefits to consider for your customers.

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Lesson 6: Innovation – Inventing New Ways to Excite

If you are planning to break into the Robo-Adviser industry, then formulating new concepts with your platform could prove to be a key differentiator. For example, combining the use of artificial intelligence into your financial products can generate some beneficial outcomes.

This may include the automation of new device integrations or deploying new services. Streamlining the customer experience through automation can also increase your chances of generating new customers, keeping those customers tied in with your product, and increasing their lifetime value to your business.

Here are a few useful strategies that you can implement with artificial intelligence that you can leverage for your Robo-Adviser:

  • A user is able to quickly open an account and link bank and investment accounts.
  • Your platform could provide a user with a tailored portfolio of assets (according to their risk profile) through algorithms, which determines an asset allocation action based on their goals.
  • The ability to re-balance portfolios and make targeted suggestions to users based on the state of the market, their financial standing, or other factors but keeps them on track to reach their goals.

From advanced trade analytics and API integrations to enhanced user experiences, automation through AI can drive new operating models and deliver personalized financial intelligence, resulting in a smarter process for your firm and supports your customers in making better decisions for their goals.

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Developing a Robo-Adviser product comes with its own benefits and can be very rewarding if executed correctly, so consider the features of each method and assess what outcome is the best for your bottom line AND meets the needs of your customer.

In 2020 and beyond, we can see what may shift in the financial advice industry based on current market trends and legislative regulations. The impact that these activities might have can result in aggressive innovations for advisers and transformative experiences for investors.

About Velox Clearing

Headquartered in Anaheim, CA, Velox Clearing LLC is a technology-forward correspondent clearing firm, prime broker, and RIA custodian. Combining deep expertise, exceptional client service, and cutting-edge technology, Velox empowers its clients to focus on controlling costs, acquiring new business, and leveraging their market presence.

Velox is registered with the SEC, is a member of FINRA and the NYSE, and is a member of DTCC/NSCC and SIPC. For more information, visit