On the subject of investing your savings with the help of algorithms and the Web, a conference in Milan organised by Ascosim and a study by PwC take stock of the situation in the sector. SoldiExpert SCF is one of its pioneers and has created a hybrid model intended not only for small savers and does not focus on only one instrument such as ETF. This is because the Italian saver is looking increasingly for an alternative to bank channels and wants independence, global consulting and active management. Not the same old stuff.

MoneyReport, il blog di SoldiExpert SCF

Scopri cosa possiamo fare per il tuo piccolo o grande patrimonio e contattaci per fissare un primo check-up gratuito o una valutazione del tuo portafoglio

This is the english version of the original post, published (here) the 28th september 2016

Can technological innovation and the digital revolution improve the way savers invest and can they represent a business worth investing in from the entrepreneurial viewpoint?

Are algorithms and robo-advisoring an opportunity or a threat to the sector? And what does the Italian scenario suggest at this time?

These were the topics discussed at the conference entitled “Robo-Advisor e dintorni. La digitalizzazione del servizio di consulenza” (In and around Robo-advisor. The digitalisation of consulting services) on 21th September organised by Ascosim, the association of financial consulting companies at the “Salone delle Feste” of the Four Seasons Hotel in Milan.



The speakers made many valuable contributions on the state of the art in robo-advisoring in Italy and in the world, its prospects and weak points with a healthy dose of realism from almost all the presentations of the participants.

For Italy and more generally for robo-advisoring, in the ironic lines of the actor Renato Pozzetto in a film, “there are great prospects for the future” but it is still too early to say that this where the party’s at”.

The case studies are still the same ones of the most important US companies in the sector such as Wealthfront and Betterment joined by some colossuses in the stars and stripes savings market which have decided to become players such as Vanguard or Schwab while some of the big concerns in the sector (Fidelity, Schroder, Black Rock) have put a finger in the pie by taking over some start-ups.

The savings collection growth rates of some of these companies is high but still almost peanuts compared to the masses of savings managed traditionally. Most importantly, if you look at the bottom line of the profit and loss account almost none of these schemes today produces profits but on the contrary swallows them up often at an alarming rate.

The interaction based on the classic model of a “physical” consultant or banker with the customer has not been undermined in the least by this disruption. Will things change? And what is the situation for the Italian saver and the companies considering this sector?




As a speaker I had the good fortune to speak at the end of the day’s work and to express some ideas that had been reinforced after hearing various stimulating speakers who had warned, each in a different way, those who operate in this sector to focus more on the word “advisor” rather than “robo”.

And to concentrate especially on the saver’s needs in order to provide a service with added value which is not only that of providing “pies” (pie charts of asset allocation) but genuine consulting, relationship, assistance and strategy.

The saver wants good advice above all. Robo-advisoring can be a means but it is not the end that investors have in sight. And to understand a saver’s needs, especially if we are not talking about requirements that are very basic or limited to a small percentage of the portfolio, no web site or app or algorithm, however user friendly, can fully succeed in this. With the savers and investors that want financial consulting at a certain level it is necessary to talk things over in person.

And it is here that there is a vital space to be filled and where the consultant must be paid fairly. One way of thinking comes from SoldiExpert SCF, the company that I founded together with Roberta Rossi in Italy at the end of 2001, convinced that merging independent financial consulting, the use of algorithms in the selection of investments and an approach based on the Web might lead to something good, profitable (but honest) and win-win for everyone.

Exactly 15 years have passed since that day when we went to the notary to establish SoldiExpert and our observatory on the sector has become increasingly interesting. Our company (which has always made a profit and exceeded 100 million euro of assets under consulting) in the meantime has become one of those in Italy with the most complete approach, a fact proven by the latest study (see here) published by PricewaterhouseCoopers (Pwc).

One of the most important business consulting companies in the world has in fact included us in the 5 most important in Italy for market analysis, stressing the upper target we aim at and the hybrid approach applied.

Because “robo-advisoring” is a hard job….

Since September 2001 when we founded SoldiExpert (at that time it was called BorsaExpert) many things have happened (and many new things are in the pipeline) thanks to an article published in March 2002 in Financial Magazine where the term “Robo-Adviser” was used for the first time and which was later to become a “cool” term in the eyes of those who work in the sector.



L'espolosione delle ricerche della parola RoboAdvisor secondo Google Trends

The explosion in searches for the word Robo-Advisor according to Google Trends


Compared to the “tech-enthusiasts” who see and forecast “magnificent and progressive prospects” for outright robo-advisoring, we have always been a little more realistic and personally (just read previous contributions on the topic) I have always been somewhat sceptical concerning the economic sustainability of various “robo-advisoring” projects and the difficulties, which are not slight, to cope with especially in the Italian market.

And if we analyse the balances and the bottom line of almost all the best known robo-advisoring services in the United States and in Europe we will discover that the economic sustainability of most of these start-ups is a good way off even after several years of operation. In many cases there is in fact an original law in operation according to which the more you invoice the more you lose.




Salvatore Gaziano, co-fondatore di SoldiExpert SCF durante il suo intervento al convegno "Robo-advisor & dintorni"

Salvatore Gaziano, co-founder of SoldiExpert SCF while speaking at the “Robo-advisor & dintorni” conference


A great number of these companies have relied on the incentive of a low price and portfolios with a low added value which represent the same logic that the saver is proposed in more than  90% of the cases of the old financial promoter in flesh and bone, a point also made well by Daniele Bernardi, founder of Diaman Scf,  during the conference.

As regards “robo” and above all “advisoring”, nothing particularly new has been done in many of the companies that have the greatest media coverage and the replacement of investment funds with ETF in the recommended portfolios is logical (lower management costs for the customer), but this is not the only thing that the saver with slightly more complex needs considers.

“Every customer can obtain a Ford T in any colour desired, provided that it is black” is the famous phrase of Henry Ford of 1913. In the case of SoldiExpert SCF we have not applied this principle by offering only ETF portfolios but also by including shares, bonds and mutual funds because not all savers are the same and the Italian saver who turns to financial consulting online is really not a standard type….

In our model customers can choose from a very extensive range of portfolio models (of which they can assess and compare past trends in relation to the market) or chose the one considered most suitable or request a genuine customised consultation. And our consulting ranges from ETF to funds, shares and bonds is intended also for customers with substantial assets who are looking for an alternative to the traditional private banking and who are tired of the usual stuff.



Why the “low low cost” incentive does not convince us

Concerning the “low cost” model which various robo-advisors have adopted (and which also explains their financial difficulties) we have some doubts.

Low price is not synonymous with value. It forces you to make more sales in order to see some profit, you have less chance of accumulating profits to invest for example in research and development or for expansion, it is easy for competitors to do the same because there will always be someone willing to reduce prices in an attempt to attract potential customers, the less your business is financially sustainable the more you risk losing your independence. And independence is not an option if you present yourself on the savings market as a financial consulting company without interests conflict.

Furthermore, from the viewpoint of the business you cannot take it for granted that reducing prices increases the customer base at a rate which is more than proportional. If for example you halve the sales price of a newspaper doubling the sales is absolutely not guaranteed unless in this particular case you do not sell the advertising pages at a higher price. But at that point your main revenues depend increasingly on the advertisers.

But what weighs heavily on the economics of many robo-advisoring systems is mainly the costs related to acquiring customers. This is something that risks becoming a real bloodbath as documented very effectively and provocatively by a study published Great Britain with the emblematic title Fintech Folly produced by SCM Direct (an investment management company in London), prying into the economic affairs of a number of robo-advisors, mainly English, and which is worth reading (see here) if you have to analyse the sector in an unbiased way and not read only the marvellous news on this sector.

According to SCM every customer of a robo-advisor should remain invested for an average of 11 years in order to allow the platform to reach the break-even point, while experience suggests that typical savers are very difficult to loyalise and after 3 years there is a good chance that they will change their investment management.

According to the study this is because the current cost of acquisition often exceeds the annual revenues by a factor of 10 if you pursue aggressive marketing in order to obtain names by concentrating all efforts on the web, TV, radio and the press. According to Alan Miller (who founded and manages SCM in Great Britain together with his wife), the desire for rapid growth with tens or hundreds of thousands of customers acquired through incessant publicity can basically be very expensive and from the economic viewpoint turn into a bloodbath.

Something similar to what happened at the beginning of 2000 with the “new economy”, for those who remember when it happened, where there were very few winners but many schemes turned out to be totally unsustainable from the economic and financial viewpoint.

This was also because many robo-advisors including the best known were created mainly in the last period of brilliant performance when shares and obligations were practically always on the rise and it will be important to see what happens to the assets under consulting when put to the test by a decidedly bearish market. How will the portfolios behave in the event of long dramatic index drops? Will customers remain loyal for better or for worse?

Let’s be clear, robo-advisoring is certainly not a bluff and it is too early to determine what the really winning model will be in the “heavyweight” category and there could be more than one. We are now at the stage where each operator is sounding out the way ahead and we are still at the “creative” stage. And this is something good because greater competition leads to greater stimulus and opportunities to make the public aware of this more automated method of investing.

The world of asset management and consulting needs a more rational, flexible and active approach!
And the use of algorithms can help the savers (but also and mainly their asset managers) to improve the way they handle savings with a better diversification of strategies for more effectively face the numerous “behavioural” mistakes that investors make too frequently.

No robo-advisor would advise a saver to buy Monte dei Paschi shares or a product without a track record and it would be loaded with charges! And no robo-advisor would obstinately keep a dramatically falling share in the portfolio only because “it cannot fall any further” and because closing an operation with a loss is something that hurts our pride.

Robo-advisoring is something that will slowly change the asset management and consulting world but through a hard process of selection which will inevitably be to the benefit (also for the economic reasons explained well in the SCM study) of those who already have a customer base (such as the incumbents, the banks that already have customers and do not need to lean over backwards to reach new ones) or the companies above all such as the GAFA (acronym of the web powers Google, Amazon, Facebook and Apple, Ed.n.) which on the Web can already count on millions of names in their databases.

In fact if you look at the assets under consulting among companies that have adopted a “robo” type approach you will notice that in the United States (where almost 90% of the market is concentrated today) the “old” companies in the sector such as Vanguard or Schwab shot immediately to the top of the ranking and could even transfer some of the already existing customers.

Challengers such as Wealthfront or Betterment cannot compete easily with these heavyweights in the sector and in order to make their business model economically sustainable some of these start-ups (as we already explained two years ago) are trying to offer their platforms to traditional operators (banks and financial consultants) passing from robo-advisor to robo4advisor (robo for advisor). Alternatively, some start-ups in the sector are trying to be taken over by the “dinosaurs” which in the beginning they had waged war against.

These are traditional banks or asset management companies which can thus obtain a stake in the sector and allow an honourable exit or turning point in the accounts of a number of these schemes that would otherwise find it hard to survive as “stand alone” concerns on the market.



Italy is like Mars

For the challengers and the start-ups too …the challenge is certainly a difficult one and the ability to be different with an offer having a high added value (also aimed at a sophisticated public) and knowing how to build a “warm” relationship based on the creation of a real relationship of trust with the clientele will certainly count, especially in Italy.


This is the path that SoldiExpert SCF has been following for some time in dealing with a market such as Italy which, at the conference on robo-advisoring organised by Ascosim, I compared, and not by chance, with what the astronaut Mark Watney, played by Matt Damon, had to face in the film “Sopravvissuto – The Martian. A great informative film by the customarily great Ridley Scott (Alien, Blade Runner, The Gladiator).


The hostile environment of the red planet where the struggle to survive is made difficult by the initial conditions. Something similar to what happens on planet earth 75 million kilometres away in Italy in the asset sector.

This sector characterised by an extremely low digital literacy rate among Italian savers and less frequent use of internet banking (half in comparison with countries like Great Britain and France which is halved again for people over the age of 55 according to the latest Eurostat report); a financial culture at the lowest European levels (we talked about it here) also confirmed by the most recent Consob report; a market dominated by an offer where banks and insurance companies can rule the roost and exert considerable influence on the drafting of regulations and legislation.




According to “Robo-advisory moves forward in Italy” produced by PwC in cooperation with the Catholic University of the Sacred Heart in Milan, 40% of the people interviewed welcome this investment solution and are willing to trust a robo-advisor.


Italy is a complicated country (we have seen it with the regulations on independent financial consulting) and Italian legislators evidently like the situation where Italian savers encounter a great deal of confusion and less clarity in the market.

Fortunately however there is an increase in the number of savers looking for something else for the management of their savings such as professionals in the sector who want to offer their customers something different to the usual stuff which is often like a stew which is only highly salted but lacking any real flavour as confirmed furthermore by the very interesting recent research by PwC on the profile of Italian savers presented precisely on the occasion of the conference on Italian Robo-advisors.

“The retail customers of banks and financial consulting networks are becoming increasingly “smart” – according to the PwC study – We are talking about investors not satisfied with the current levels of banking services and who are looking for advanced asset management solutions with a low personal contact”. The study also revealed that “40% of Italian customers fall into the “smart” profile category while 34% are defined as multitask meaning fairly satisfied with the current level of service but open to new ideas. The remaining 26% consists of investors with a traditional approach who depend on direct interaction with a banker or a financial consultant”.

For this reason the future of robo-advisoring, especially in Italy, will be hybrid and savers in the near future will have increasing contact (perhaps unknowingly) with a “centaur” model, half man and half machine for the management of their savings. The financial cyborgs are already among you.


Twitter: @soldiexpert