Impact of Roboadvisors on Overall Pricing Structures and Infrastructure Stack Pricing

Autonomous Research has analysed and compared the change in pricing structure between a traditional advisor, at 150 bps, a hybrid advisor, at 45 bps, and a B2C Roboadvisor at 25 bps.  The costs have been calculated using three pricing factors: (1) back and middle office, (2) asset management and (3) distribution. With the addition of a Roboadvisor, including the case of a hybrid advisor, it is evident that back and middle office functions are significantly reduced in cost. A decline  from 50 bps for a traditional to 10 bps for a hybrid and 5 bps for a B2C Roboadvisor. Distribution and asset management were still heavily impacted, each falling from 50 bps to 10 bps when changing from a traditional advisor to a B2C roboadvisor.

The second graph illustrates the difference in infrastructure stack pricing between a traditional advisor stack and a B2B private label stack. Within the traditional advisor stack in particular, we find the cost to be 50 bps but this figure is halved when compared with B2B private label stack. This is primarily due to custody costs being reduced to zero from 15, as it becomes monetized through asset management and does not require transaction fees for ETFs. Whilst most costs fall, there is a notable rise in client portal pricing that can be explained by Roboadvisors requiring more accessible platform for clients due to the lack of human interaction available.