Just a week after Deutsche Bank agreed to sell its U.S. brokerage business, it launched a robo advisor -- albeit for clients in Europe.
It's unlikely the Frankfurt-based bank would bring an automated investment offering to the U.S. market, as many of its peers are in the process of doing, even though the firm could resurrect its brokerage business in the future online, analysts say.
"While it could, I don't think it will be material enough for Deutsche to be a top tier performer," says Wayne Cutler, managing director of banking analytics firm Novantas.
"Of course it could gain some share but without something truly differentiated and being a bit late to the game, they would have to spend considerably on advertising and sales, which would erode [the entire margin] in a low-margin game such as robo advisors."
The offering, called AnlangeFinder (translation: investment finder) will roll out next year, and will be made available to first-time investors. "This investment tool helps Deutsche Bank position itself for the digital natives among its clients who are keen on seizing the opportunities offered by capital markets," said Markus Pertlwieser, Deutsche Bank chief operating officer, in a statement.
The timing of the launch is of interest, given Deutsche inked a deal earlier this month to sell its U.S. Private Client Services unit to Raymond James, says Alois Pirker, research director for Aite Group's Wealth Management practice.
"If I had to bet, they probably won't bring their robo here," he says. "They are selling off the brokerage business. They didn't have enough scale to operate it profitably. But then again, it could help them keep a foothold in that lower client segment."
Deutsche spokesperson Catherine Wooters said the firm declined to comment.
But in a previous interview with Re: Invent|Wealth, Chip Packard, who co-heads the U.S. wealth management unit for Deutsche, said the firm was unsure about its U.S. plans for automated advice.
"It's not clear to us that the ultrahigh-net-worth client segment that we serve in this region is demanding robo advisors to replace advisors," he said.
Packard acknowledged there will be client demand for "some of the solutions they might receive from a robo advisor, such as enhanced data analytics and reporting capabilities, within the context of a broader wealth manager relationship."
"Now, we have a global business, and there are other things we do in other parts of the world where it may or may not be more relevant."
Here in the U.S., Pirker and Cutler agreed that gaining relevancy in the robo space is becoming increasingly difficult.
"In the U.S., the self-directed investment market is comprised of the major scale players – TD Ameritrade, E-Trade, Schwab, Fidelity, and Vanguard; niche players [such as] Scotttrade; and banks that have self-directed brokerage platforms," Cutler says. "Net net, it is a very crowded marketplace."
"The U.S. market is learning that pure no-touch robo advisors offerings has a fairly limited appeal and that the financial services companies are realizing they need to build a workforce of lite touch advisors to help consumers use the robo advisor tools."
Even if a robo advisor offering may currently be a loss leader, it's important for firms to plant one or risk losing younger clients who will mature into greater wealth, Pirker notes, adding there are also considerations regarding market segmentation and finding the best solution to service different client tiers.
"If you're a firm active in the mass affluent space, you need to take position now," Pirker says, citing Scottrade's recently divulged plans to develop a robo advisor. "If you're in the HNW space, you have more time. But you still need to modernize your service model."
- Edward Jones May Push Back Goal of Reaching 20K Advisors by 2020
- Deutsche Bank Error Briefly Sends U.S. Client $6B
- Deutsche Bank, Credit Suisse Set to Scale Back Global Ambitions