Europe Fintech Wealthtech

Robo to the Rescue: Why Millennials and Wealthtech Need Each Other

For those born between 1980 and 1996, dubbed millennials, navigating the financial world can be a struggle. Regularly facing the consequences of recessions and high unemployment rates, this generation just isn’t investing as much as their older counterparts, even being accused of “killing” wealth management. 

Elsewhen is a digital product consultancy that delivers consumer-grade CX to enterprise businesses in insurance, financial services, data, healthcare and banking. They aim to help companies to identify new business possibilities and surpass new customer expectations. The company was co-founded by Leon Gauhman, and here he explains why he thinks the worlds of millennials and wealth management aren’t mutually exclusive. 

Leon Gauhman, Chief Product and Strategy Officer, Elsewhen

They’re good at saving but chronically underinvested. Most want to retire early, yet face huge challenges in retiring at all. As far as debt-laden millennials are concerned, the financial struggle is real – and savvy wealth management firms could make good on the knowledge gap.

Recent advances in wealthtech place management services on the cusp of a tectonic shift which may replace its traditionally opaque and entirely human-managed model with something altogether more automated, customer-centric, and progressive.

And wealth products aimed at an underserved millennial audience could stand at the forefront of this fresh new offering, improving the financial fortunes of both millennials and the wealthtechs themselves, who have so far struggled to grab market share and turn a profit.

The rise of next-gen robo-advisors

Probably the most profound disruption to wealth management has been down to the advancements in robo-advisory. Despite a decade in the market, robo-advisors have only secured a small percentage of the wealth management business, but they do offer lower fees and entry investment points than those charged by traditional wealth managers.

This has made wealth management more accessible to a new group of non-premium asset holding customers, including a younger audience of millennials who may previously have written off wealth management as out-of-reach.

While these developments have not yet triggered the revolution that the wealthtech pioneers anticipated, newly evolved features could be the catalyst needed to finally deliver major change. The newfound regulatory ability of Robo-Advisory 3.0 to offer genuine, personalised financial advice as opposed to guidance, is set to take this segment of wealth management to the next level. Its potential chimes well with the time-poor millennial demographic, who want quick, convenient and non-judgemental advice that is tailored to their lifestyle.

And wealthtech only promises to get more sophisticated. Along with the access to wider asset classes beyond just ETFs (exchange-traded funds), the forthcoming Robo-Advisor 4.0 could feature self-learning AI investment algorithms that can adjust a client’s portfolio in real-time, based on changes in their investment objectives and the wider market.

Riding the millennial wave

The major potential changes in robo-advisory include the ability to trade in asset classes other than ETFs and greater sophistication in how robo-advisors absorb and respond to customer data. To date, most platforms have been limited to a narrow range of index-linked ETFs. The next generation of robo-advisors could broaden the range of asset classes available to investors – opening the door for more aggressive investment and therefore the potential for greater returns.

Secondly, the convergence of Open Banking and third-party data and insights (including information about customers’ spending habits and values) raises the prospect of highly bespoke, targeted and responsive advice. This can be combined with a deeper understanding of the customer’s goals.

Fully automated financial advice can help underinvested millennials navigate their finances and set up for the future, as opposed to just listing the investment options available and the relative risk profiles.

Suppose that a client’s shopping bill suddenly includes nappies. This may be the trigger for a robo-advisor to recommend setting up trust funds for children, or – depending on the client’s appetite for risk, diverting funds to higher–risk/higher–return investments. Or imagine the client is about to buy a jumper for £50. The robo-advisor might generate a mobile alert that suggests buying a different jumper for £30, and channelling the remaining £20 into their pension where it could potentially deliver a much bigger return on investment.

Which companies are leading the charge?

Brands like Betterment, Vanguard and Wealthfront have done a vital job establishing robo-advisors as a viable mainstream alternative to traditional wealth management. They were also among the first to handle more complex tasks than just investing in ETFs on behalf of customers – for example in guiding clients towards tax–efficient decisions.

Vanguard recently launched Digital Advisor aimed at younger investors, which uses notifications to change behaviour. It also aims to adapt its advice to changing market conditions such as reminding users to stick with long-term investment plans, which include stocks to mitigate the effects of market volatility.

Newer market entrants are using algorithms to create a responsive relationship with clients. Robofolio recognises changes in market conditions and automatically recommends shifts in client investment. For its part, leading US player, Fidelity, looks at investors’ risk profiles and offers recommendations towards achieving their key life goals, such as buying a home in three years.

The future: hybrid models and partnerships

Robo-advisory is highly competitive so brands need to work hard to differentiate themselves. An obvious way to do this is to nail the customer experience. If brands identify that they need to address issues people have about trusting AI with their money, then there could be a larger role for hybrid models, which combine the best AI can offer with a human touch. This concept could sit well with millennials who will need a guiding hand into investing.

Adapting to the needs of a less affluent, more digital-native audience is crucial if the wealth management sector wants to retain custom as money is passed down the generations. But it’s also worth keeping in mind that democratisation can be a double-edged sword for robo-advisors.

Less wealthy customers are still expensive to acquire and have so far been very difficult to make a return on. Going forward, wealthtech players will need millennials to adopt their services to turn a profit and avoid consolidation.

So it will be important for robo-advisors to a) maintain their focus on wealthier clients or clients likely to become wealthy (the so-called ‘Henrys’) b) develop a detailed understanding of the behaviour of the mass affluent customer segment, and c) cross-sell into other areas of financial services. In the meantime, don’t be surprised if there is more consolidation, and more partnerships between traditional banking brands and leading robo-advisors, such as the recent Barclays/Scalable tie-up.

Whatever the challenges, it’s worth noting that the lion’s share of robo-advisor investment is currently in the US, meaning the global market is all to play for.


  • Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.

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