47 connected strategy for asian wealth management ^Top need for frequent engagement and connectivity, limiting a key benefit of a con- nected customer experience of frequent interactions and data-driven insight and personalization over time. This limits network effects for a roboadvisor as the value to the ‘n+1’ client is not materially greater than that to the first client. For example, Nutmeg, one of the UK’s pioneering players in the segment was still unprofitable, nearly a decade after its founding48 and ultimately sold to JP Morgan. There are traditional scale benefits — i.e., a larger AuM roboadvisor generates more revenue to support product development and brand recognition — but such benefits are easier to accrue for a roboadvisor embedded in an incumbent wealth manager with a large, under-penetrated existing client base. • Roboadvisors take a purely rational, portfolio optimization approach to wealth manage- ment. However, it is well known that clients exhibit a range of behavioral biases49 in investing. The ‘homo economicus’ persona is limited at best50. For most consumers, investing decisions are not perfectly rational and therefore a tax efficient, Mar- kowitz-optimized portfolio of low-cost ETFs is not one that consumers intuitively understand or gravitate to, independent of a human advisor’s coaching. As a consequence, many roboadvisors are not yet profitable and some have closed within a few years of their launch (e.g., Smartly in Singapore51). We think some will be acquired by larger firms in Asia while others will fail. This said, the approach of North American roboadvisors such as Betterment, Wealthfront and Wealthsimple initiated many beneficial changes in the industry, which will continue to evolve and improve. For example, going direct to consumer, adopting a client-centric approach, significantly improving the user experience, and building for future affluent consumers. To think about how the connected retailer architecture may evolve, we find it instructive to look to other industries with more advanced connected strategies in place. For ex- ample, in media, firms that started as connected retailers moved upstream to become connected producers as their connectivity to clients gave them insight into consumer preferences. Think Netflix as its streaming service created a richness of data and insight, allowing it to move upstream to content production. 48 “Loss-making roboadvisor Nutmeg to be bought by JP Morgan as the US investment bank targets British consumers”, www.thisismoney.co.uk, 2021 49 Prospect theory, Kahneman and Tversky, 1979 50 “Digital advice: how can we broaden beyond the “homo economicus” persona”, LinkedIn post by Alexis Calla, 2021 51 https://www.finews.asia/finance/31329-singapore-robo-advisor-smartly-winds-up-business