As an investor what are you buying with a digital wealth solution? Is it a technologically delivered product first and foremost? Alternatively, is the robo product just a clever wrapper which uses low cost underlying funds (usually ETFs) to achieve the lowest possible cost?

Or is it, as I believe is the case, a new way of delivering a better asset allocation outcome which combines both technology and lower cost? I think that most readers might opt for the third option but I would contend that this introduces a tension – that most asset allocation strategies employed by digital wealth providers are about as innovative as the steam engine. In simple terms, most digital products look like they have only moved on one stage from the Asset Allocation model version 1.0 which is itself a mutant combination of the 60/40 rule (60% equities, 40% bonds) spiced up with a classic lazy model portfolio structure (defensive, balanced, aggressive/adventurous). Where’s the innovation in these asset allocation solutions?

This point was underlined in a recent study by German index firm Solactive which looked at the average portfolio composition of US and European robo platforms – you can see the report here ( ).

It’s completely unsurprising conclusion is that US advisers tend to have a higher equity weighting than their European peers, who, by contrast, have higher bond and cash weightings.

Europeans, more cautious, Yanks more adventurous – who’d have guessed!

More pertinently the asset allocation mixes all looked decidedly pedestrian and didn’t make me think – “gosh, its really worth paying 25 or 50 basis points for this asset allocation expertise?”. This is especially true if the cheapest solutions – using the big standard mixes – are already being offered by huge scale providers such as Vanguard and BlackRock, with sub 30 basis point price points. Frankly, given these low cost products, anyone charging above 30 basis points for a solution either better have amazing tech or great investment solutions…or both.

I think though there is a deeper problem – we need to rethink asset allocation. Itself and how it produces portfolio outcomes The standard lazy or model mixes serve a valuable purpose and will satisfy a great many investors but there’s need for more differentiation. Amongst the US ETF strategist community that might mean a greater focus on more tactical solutions which switch asset classes around using lots of different macro signals – this might help to justify a higher fee though it ultimately runs into the challenge that tactical market timing doesn’t usually add much value.

But the rise of providers such as Motif - – hints at a more useful way of thinking about asset allocation. This US investment technology platform speaks to a need to individualise investment ideas and thus make bespoke asset allocations. The most obvious example is that asset allocation needs to be increasingly conceptualised through the prism of ESG investing – Motif already has a core ESG portfolio which it sells to enthusiastic millennials (and more than few grey hairs).

If younger investors are more hopeful about the future and thus want an ESG or Sustainable asset allocation – a gross generalisation I agree – perhaps older investors want a much more cynical asset allocation framework (another shocking generalisation). In this case a permanent portfolio approach might work which combines simple allocations to assets such as gold and property to guard against the horseman of the economic apocalypse (inflation, deflationary depression, government confiscation and civil war).

But I’d challenge investment professionals to be even more innovative – the ETF revolution has brought forth all sorts of bizarre new products but what it has also revealed is that investors have an appetite for ever more niche ideas. Robotics and automation ETFs have prospered alongside the disruption theme, so why not a digital wealth asset allocation built around themes such as disruption or automation? Motif already plays around with this idea in its bespoke solutions, so why can’t portfolio builders do the same?

But perhaps there’s an even more radical solution, which has been enabled by all this technological disruption within finance – social investing. At the moment most of the big social investment platforms such as eToro and Darwinex have focused on a trading based architecture – you follow the increasingly frenetic trading strategies of investors with bizarre sounding monikers. But many of the most successful social investors are also professional investors themselves following macro based investment strategies, which opens up an intriguing concept – social investing focused on asset allocation.

Let’s unleash the power of all those wannabe asset allocators to produce investment solutions via digital wealth platforms. In practical terms a digital wealth platform could in effect open a market place for asset allocation ideas. In reality the first users would probably be existing professional advisers and small fund managers looking for a new channel to market for their ideas. But as competition intensified we’d have a profusion of new asset allocation strategies emerge, many of which might be hugely novel – emerging markets strategies might slug it out with permanent wealth based ideas using digital currencies? Innovative income solutions might also emerge as might enterprising riffs on quantitative investing – all open to transparent analysis with real attention focused on outcomes. Crucially we’d take asset allocation away from so called ‘experts’ with their staid model portfolios and open it up to new ideas about how to combine assets creatively to achieve the right investor outcomes?