Making sport an automatic pick for robo-advisors
In the purest sense, robo-advisors provide clients with automated, algorithm-driven financial investment activity and advice, with no human involvement. However, the space ranges from these fully automated offerings to hybrid versions involving the option to talk (or even meet) human advisors.
People in the UK have around $15 billion of investments managed by robo-advisors and it’s estimated that by 2025 $16 trillion in assets globally will be managed this way. The industry has many parallels to the challenger banks: an increasing glut of new entrants making differentiation harder, huge expectations and investment, quick early growth in customer acquisition but most struggling to make a profit and several firms having already bitten the dust.
One of the main concerns over the long-term viability (and inevitable consolidation) of robo-advice businesses is (a) the relatively large amount of money being spent on new customers (up to £500 according to Boring Money’s Holly Mackay) and (b) ineffective advertising strategies. Very broadly speaking, it’s estimated that the average amount invested by a customer is £20k but the robo-advisor will make less than 1% on this. If these are all correct, that’s up to 2.5 years before the customer becomes profitable.
Other than a few examples, the industry hasn’t been doing what Degroof Petercam’s Xavier de Pauw summed up as key to a viable and profitable future: having a “fair amount” of marketing budget to be “used wisely”.
Unlike their traditional counterparts, the robo-advisors as a whole are yet to harness traditional marketing – let alone, sport sponsorship – in a significant way. However, the challenges around fierce competition, brand awareness, differentiation and high cost of customer acquisition are where rights holders – who already have loyal and highly engaged audiences – have valuable cards to play.
Rights holders offer the above-the-line exposure, legitimacy and trust – the latter crucial when being responsible for ‘gambling’ with other people’s money. Certainly, the bigger and more established sports offer that wider brand awareness while the less traditional sports are better placed to provide a more natural fit in terms of slightly younger audiences and embracing that sense of challenging the usual way of doing things – as well as offering lower price points.
However, all rights holders need to be realistic about the affluence of their audience. Compared to targeting challenger banks, for example, the barrier to entry is naturally higher on the investment side. Although many robo-advisors offer no minimum investment level, the reality is that to make it worthwhile for both the client and the business, investors need to have a fair amount of spare cash to invest over time (comes back to the £20k average holding being a fair guide).
So, in an industry where its all about being as efficient with money as possible, compounded by low marketing budgets and profit margins, rights holders will need to be more financially specific about the value they can provide. Be this cost per eyeball to cost per acquisition – surely sport sponsorship can improve on £500? If so, you have a fair chance that you’ll be seen as an attractive stock for the robo-advisor marketer to pick.
Robo-advisor sport sponsorship is one of our new series of caytootarget™ reports designed specifically to help rights holders save time and resource when it comes to overcoming their key pain point – identifying viable target brands and hitting the right decision-makers with relevant and compelling proposals. We’ve covered sectors including:
- Health insurers
- Electric cars
- Challenger banks
- New brands launching in the UK
- Quick Service Restaurants & Food Delivery