The Real Impact of Robo-Advisors on Retail Energy Choice

For the better part of a decade I managed medium to large commercial and industrial businesses for the nation’s largest energy retail and wholesale energy provider. I was enticed by the fast-pace nature of the business and how the industry felt new and innovative. There was no doubt that we were on the cutting edge of revolutionary technology and it was exciting. Unfortunately for me (and C&I consumers), that pursuance of perfection focused more on energy generation (e.g. solar, wind, hydro-thermal, natural gas etc.) and less on retail energy choice.

We’ve all witnessed just how disruptive new technology-based business models can be given their relentless desire to provide an easy and intuitive customer experience. Consider Uber displacing taxi cab services or the more recent disruption of the Wealth Management industry by firms like Betterment and SigFig.  We are talking about major market disruptions costing traditional players billions of dollars.

According to Deloitte, the fastest growing segment of the wealth management industry is now online and referred to as “robo advisory services”. What might be more interesting than the 2,500% two-year growth trajectory, equating to almost $490B in Assets Under Management (AUM), is the analogous nature of both energy and financial markets^[1].

We plan to explore the nuances and parallels between wealth management and retail energy management in upcoming posts, but today’s post will focus on defining Energy Robo-advising and why it’s a game changer for the antiquated world of retail energy choice.

What is an Energy Robo-Advisor?

An energy robo-advisor is an automated online service that uses computer algorithms to build and manage a business’s energy procurement and budget strategy. By setting defined parameters around risk tolerance and contract terms (e.g. length, fixed components, etc.), businesses are provided with a low-cost alternative to the traditional energy broker or consultant while gaining a better more data driven results-oriented experience.

Having grown up in the energy industry as an eager tech-minded Millennial, my vantage point provided a unique perspective for how technology can (and will) come to play a role in reshaping consumer choice. Harvard Business Review defines disruptive innovation with way more analytical rigor that I can muster but here are a few things I’ve witnessed firsthand that begin to define the importance and impact energy robo-advising is poised to have on retail energy choice.

The 4’S’ Snapshot of Energy Robo-Advising

• SIMPLE – I’ve seen major market players focus on sustaining innovation by upgrading product offerings to garner greater margins and attract higher paying customers. What I haven’t seen is anyone in the industry taking note of what’s right in front of them – annoying over-engineered processes fraught with frustration and missed opportunities which force many into the arms of traditional energy advisors, brokers, and consultants.
  Imagine a world in which there is no research required to find out who can offer you the best rate strategy, what energy product makes the most sense for your business, or when it’s the right time to buy. From the moment you engage a supplier to the moment you execute a contract; every step of the process should be remarkably simple and straightforward.
• SMART – I have worked with some of the best and brightest in the industry. Veterans who witnessed almost every state deregulate. Those that saw it all, and knew everything there was to know, but even their knowledge, skills, and abilities are finite. At the end of the day, humans can only consume so much information and they can only serve so many customers.
  Imagine a world in which a service works on your behalf around the clock and is capable of continuous learning. By monitoring a number of variables such as your business’ energy data, market trends, usage patterns, and supplier performance metrics, energy robo-advisors can serve up timely insights that allow you to be the smartest guy (or girl) in the room.
• SPEEDY – In the same way financial markets move in milliseconds, the pace of play within energy wholesale markets is just as fast. Unfortunately, things seem to slow down when it comes to securing the right energy strategy for your business. I’ve seen decision makers unable to sell their approach internally while others may have been ready to execute but unable to get a contract signed, scanned, and booked by “end of day”.
  Imagine a world in which millions of data points are being analyzed and opportunities are being acted upon as fast as they can be consumed. Just think of your current process and how easy it would be to execute an energy contract with the swipe of a finger while multi-tasking in another meeting or from an island in the Caribbean. On-going supplier solicitation allows customers to understand and quickly react to market opportunities. The ability to be fully informed, and to then buy from anywhere at any time, represents the next level of proactive and timely energy management.
• SAVINGS – Brokers and consultants can provide a great deal of value under the right circumstances, but have you ever stopped to consider the cost and to what extent the level of service you receive is in line with the fees you pay?
  Imagine a world where the information you need to make important decisions about your business’ energy strategy is at your fingertips, served up in a simple, smart, and speedy way. Would you still need a broker or consultant? Would paying them as much as you do today make good business sense?

Here’s the good news. It’s here. Energy robo-advising is a new, and growing, segment of the industry and many organizations are getting onboard.

Connect with Zentility and let us help you understand how our technology helps businesses to stop over-paying for energy.

Ryan Peusch
CEO; Zentility Inc
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