Aviva buys majority stake in UK robo-advisor Wealthify

BI Intelligence

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There's been an increasing number of investments by incumbents into automated investment startups lately, including Allianz's investment in Moneyfarm, and BlackRock's capital injection into Scalable Capital.

Aviva, one of the UK's biggest insurance and workplace pensions providers, has now joined the spree by buying an undisclosed majority stake in UK automated investment fintech Wealthify. Wealthify says the capital will go toward boosting its growth and further honing its technology. The startup gives consumers a choice of five investment plans, all with a minimum investment threshold of just £1 pound ($1.32), after lowering the requirement from £250 ($329) in March.

The move seems well calibrated to appeal to the UK mass market. Unlike in the US, the average UK consumer doesn't invest, with most people only coming into contact with investment services through workplace pensions, and the provider investing on the individual's behalf. As a result, many consumer-facing automated investment fintechs have struggled to gain traction in the country. However, as part of the deal, Aviva has integrated Wealthify's services into its digital portal, MyAviva, through which its customers already access many other products, including their workplace pensions. By offering Wealthify as another utility from a trusted provider, Aviva will almost certainly maximize the service's adoption.

This is evidence that long-expected consolidation in the UK robo-investment market is happening. Given how tough the UK market is for consumer-facing automated investment fintechs, and that ever-more incumbents are recognizing the value of their propositions, we're likely to see many more such investments in the UK in the near future, as we predicted in June, at least some of which may be preliminary steps to full acquisition. We may also see more new players launching in the UK opt for a white-label model from the start, rather than diversifying to one later to achieve sustainability.

Startups with robo-advisor products are failing to live up to their initial promise.

As solutions proliferate and consumer adoption remains slower than expected, many firms are re-examining and updating their strategies to survive. 

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has put together a detailed report on the evolution of robo-advising that scopes the current market for robo-advisors, providing an updated forecast through 2022. In addition, it explains the different types of robo-advisors emerging, details how startups and incumbents are working to ensure the success of their products, and outlines what will happen to the market over the next 12 months.

Here are some of the key takeaways from the report:

• BI Intelligence forecasts that robo-advisors — investment products that include any element of automation — will manage around $1 trillion by 2020, and around $4.6 trillion by 2022. 
• Startups offering robo-advisors are struggling to acquire AUM due to overcrowding in the global robo-advisory market and lower than expected customer uptake. 
• Incumbents are rolling out their own robo-advisor products, a trend we expect to pick up in the period to 2022. 
• North America remains the leading robo-advisory market, but we expect Asia to catch up and outpace the region in terms of AUM managed by robo-advisors in the period to 2022. 
• There will be a winnowing of the startup robo-advisory market as only a few firms remain stand-alone, while incumbents looking to launch their own products will profit from purchasing the technology of startups that have fallen by the wayside, at low cost. 

 In full, the report:

• Provides a forecast for the volume of assets robo-advisors will manage by 2022.
• Outlines the current robo-advisory landscape.
• Explains how startups with robo-advisor products are evolving their business strategies. 
• Provides an outlook for the future of the robo-advising industry. 

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