While investment manager Clime is keen to target self-directed investors and enter the retail managed account market, the group has no intention of joining a robo-advice landscape characterised by cashed up institutions and poor solutions.
Speaking at a media lunch to discuss the launch of its new separately managed account solution, Clime chief executive Rod Bristow said the firm did not even consider adding a robo solution to its suite of services because of two “guiding philosophies”.
The first, he explained, has its origins in a previous role working for the Commonwealth Bank of Australia.
“After spending a bit of time inside of the CBA machine, it’s quite confronting when you’re [then] outside of that machine to see how much capital they’ve got to deploy towards technology,” Bristow said.
When it comes to developing robo solutions for private wealth clients or self-directed investors, the CEO reckons scale matters.
“It’s very much an arms race, and if you’re in an arms race with a balance sheet our size, you’ve got to think very, very carefully about whether or not you want to build a nuclear warhead when someone’s already got a thousand of them already sitting there.”
Clime manages approximately $1 billion worth of investments across its wealth advisory and investment management portfolios, making them a relatively small fish in the ‘full service’ provider market.
The other reason for not entering the robo market, Bristow said, is that the right solutions haven’t been delivered yet.
“The best robo advice solution… probably hasn’t been built,” he says. “There’s probably four guys in a garage in Bondi that are working on it right now.”
Even if a good solution gets built, he argues, the trajectory of high-profile robo providers in the US has shown that scale is not a given.
“If you look at some of the more successful robo providers out there in the US like Wealthfront and Betterment, what happened was they got to a certain level – and that was [with] a simple ‘do a wealth profile, drop you into a product’ offering – and then they couldn’t grow.”
The interesting part of those examples, Bristow explained, was that these providers – who were trying to get away from traditional advice – were then forced to put an “advised framework” over their business whereby clients with more complex needs could go see an adviser. “So that was interesting,” he says.
