Hybrid distribution channels — channels that combine elements of robo-advice with human advice — are set to expand at a higher rate than conventional advice, according to a new report on investment industry trends.
The report, published Thursday by the Investment Funds Institute of Canada (IFIC) and Strategic Insight, noted that the strongest relative growth across all distribution channels over the past 10 years has been in the online/discount brokerage and robo-advice channels.
As hybrid channels continue their expansion, they will likely “carry all investment funds with them,” the report noted — not just the ETFs currently favoured by the robo-advice channel.
Millennials, the report suggested, are more likely to use digital channels over human advice. A hybrid approach to advice would ideally give face-to-face advice firms an economical means of onboarding early stage clients and retaining their business until their situation requires more complex, human advice.
“The medium-term future of the Canadian investment fund industry is partly reliant on the ability of the industry to anticipate and respond to the financial needs and expectations of two diverse segments – millennials and baby boomers,” the report said in its conclusions.
The report also called the shift from embedded fee models to unbundled fee-based advice “one of the most significant changes in practice management across the advisory channels over the past two decades.”
It predicted that there will be $2.9 trillion held in discretionary and non-discretionary fee-based accounts across all distribution channels by the year 2026 — representing a $2-trillion increase from 2016.