The list of asset managers with a stake in robo advice platforms continues to grow.

The latest to join the digital advice club is Legg Mason, which revealed this month it had taken an 82% stake in robo platform Financial Guard, in an effort to create an alternative avenue for distribution as well as shore up its ability to meet the requirements of the new DoL fiduciary rule.

Legg Mason’s announcement came just days after national insurer TIAA, acquired MyVest, a San Francisco-based wealth management technology firm that assists broker-dealers and banks.

Insurance firms including Transamerica also provided $6.4 million in Series A funding to New York-based digital estate planning startup Everplans.

“Technology innovation is redefining consumer expectations and financial firms need a comprehensive, accessible, secure technology solution to serve their clients in this dynamic environment,” said Terence Johnson, global head of distribution for Legg Mason, in a statement.

The Baltimore-based firm did not disclose the terms of their investment.

“We see an enormous opportunity to serve the important retirement market, offering a cost-effective, comprehensive solution to plan sponsors and to easily serve the smaller segment of the market that will continue to need advice,” added Cary Jenkins, chief innovation officer at Financial Guard, a robo advice platform. 

The announcements by Legg Mason and TIAA demonstrate asset managers and insurance firms are keen on making deals for automated advice primarily because they realize it is a new distribution model, says Sean McDermott, senior analyst in consulting services at Corporate Insight.

“They need to capitalize on it to remain competitive moving forward in changing landscape,” he says.

There’s also a cost savings gained in moving to a digital platform, adds Bill Winterberg, founder of

“The robo solution is a low-pressure way for asset managers to promote their custom portfolios (matching the customer’s risk tolerance generated from the robo onboarding process) that contains many of the asset managers proprietary investment products, specifically, ETFs.”

The shift to robos as an alternative distribution model is also is being spurred by a very human reality, McDermott adds.

“The traditional asset manager relies on human advisers as a distribution channel. What’s happening now, and this has been widely discussed, is the average age of an adviser is 52. Basically, their current distribution model is relying on a human salesforce that’s going to shrink.”


The tech trend will be difficult to ignore. Bloomberg reports that money managers will increasingly need to embrace computer-driven strategies to stay competitive, according to Boston Consulting Group.

Technologies traditionally employed by boutique firms and hedge funds — including machine learning, artificial intelligence, natural-language processing and predictive reasoning — are on the verge of becoming mainstream, the company said.

Without such tools, firms risk becoming irrelevant and trailing others in their ability to produce excess returns, according to the report.

“Deep expertise, grounded in advanced data and analytics, will define competitive advantage and enable some managers to prevail,” said Gary Shub, a partner at the consulting firm, in a statement.


Another motivation toward digital is the steady pressure on costs placed on managers by passive investing’s popularity, notes Pamela DeBolt, associate director at research firm Cerulli.

“Fee pressure is a serious concern for mutual fund managers,” DeBolt says. “They struggle with manufacturing a product that hits the appropriate fee point with competitive share class pricing and are concerned with being able to achieve scale to support lower operating expense ratios.”

“We expect fee pressure to force firms to consolidate or eliminate products,” DeBolt continues. “This will create a focus on best of breed and will impact the distribution model.”

 Actively managed mutual funds in the U.S. have seen $76 billion of asset outflows in the first five months of the year, according to the Investment Company Institute.

The exception is Vanguard, which has  added  $28 billion into its actively managed mutual funds through the first half of this year.

“The whole story of the big sea change underway in money management isn’t necessarily from mutual funds to exchange-traded funds or active to passive or human to robo advisor — it’s really about high-cost to low-cost,” says Bloomberg Intelligence analyst Eric Balchunas.


Product providers and management firms say they can still differentiate themselves in a sea of digital offerings.

“Our service is very robo-like,” says Jud Doherty, CEO of Stadion Money Management. “We are using technology in the DC space, but I think we’re very innovative from that standpoint.

“The traditional robos out there are trying to get the taxable accounts or the IRAs. Basically they are competing for the same dollars and I think we are in a niche where there is relatively less competition, but it’s also a growing market.”

Abby Schneiderman, co-CEO of Everplans, an end-of-life organizing platform which attracted funding from insurance firms, says having a specific focus is key to finding value in digital offerings.


An upside to the embrace of robos by asset managers, analysts agree, is that digital platforms are easy solutions for U.S. firms eyeing overseas markets, where recent studies from E&Y and PwC show that there’s greater receptiveness among HNW clients toward managing wealth primarily digitally.

“It’s a savvy approach from an operational cost standpoint,” McDermott says. “It’s much easier to update website and tweak that make that compliant in Europe and Asia, then it would be to open an office.” — with Bloomberg News

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