Last Thursday, Aviva announced an agreement to acquire a majority shareholding in Wealthify Group Limited. Wealthify is a low cost, ‘robo’ investment service which aims to make investment affordable and accessible to the UK mass market.
Since then, the industry has been abuzz. Will this news signal the start of an M&A drive for robo advice?
The acquisition by Aviva of a majority stake in Wealthify has significant implications for the whole UK robo advice community and wider personal savings market, says Ian McKenna, director at DigitalWealthInsights.com. McKenna expects the deal will spark much more M&A in the sector as others try to identify and assess quality propositions to add to their offering.
“This move by the world’s 12th largest insurer and major asset manager is far more significant than the previous investment by LV= in Wealth Wizards and other UK robo deals. Aviva has a far greater degree of scale and partnerships that can be leveraged to the advantage of both businesses,” he says. “Aviva has been a real leader in the digital revolution with the London digital garage having set the trend now being followed by many of their peers.”
DigitalWealthInsights.com comprises a team of independent experts who have over two decades of experience in analysing financial technology. Robo propositions have been on the rise, according to McKenna, as the UK follows America’s tech-heavy footsteps.
“With this acquisition Aviva is emulating Black Rock and other US institutions who acquired robo firms early rather than build their own in order that they could quickly partner with other financial institutions,” McKenna adds.
“This move will cause Aviva’s peers to question if they are now at a commercial disadvantage particularly when trying to build partnerships with building societies and other savings institutions. It could also have significant impact on the asset management community. Do Aviva Investors had a significant advantage over their peers with an innovative new route to market?”
There are unlikely to be enough robo advisers to supply demand from all the institutions who will wish to acquire one so they can maintain their competitive position. Institutions will, however, need to have a clear understanding of what represents the good the bad and the ugly in this sector, according to McKenna.
“The deal may also unlock opportunities for Aviva to deliver other products such as life and personal lines insurers to the attractive Generation X and Millennial demographics targeted by Wealthify. While the deal opens many opportunities, the hard work is yet to be done and it will be two to three years before we can see the benefits reflected in Aviva results.”