Digital advice expects big growth from banks
Digital advice as an industry will take off once it is built into retail banking, capitalizing on an investor segment ignored by wealth managers, says SigFig CEO Mike Sha.
That's why, announcing his firm's newest partnership with Citizens Bank, Sha predicts his platform will reach half of all U.S. households by next year.
"If you have $50,000 to invest, nobody's been knocking on your door to provide you with financial advice," Sha says. "The first place you will turn to will be where your assets are, your bank."
SigFig will provide Citizens Bank with its digital advice platform technology. The bank reports $147 billion in assets and 1,200 branches spread across New England, the Mid-Atlantic and Midwest.
Sha declined to disclose the terms of the partnership, but said the customer profile at Citizens is in a mass affluent "sweet spot" that his firm wants to reach.
Indeed, the mass affluent business is especially important to Citizens, according to a recent article in Bank Investment Consultant, a sister brand to Financial Planning.
The bank said it has a higher portion of its business in this segment than most of its competitors. More than half of its 2.5 million customers are mass-affluent or above, compared to roughly 44% to 49% for the largest banks, according to Citizens.
Mass affluent business is "an enormous opportunity for us," John Bahnken, head of Citizens Wealth Management, said at the time.
Regional banks have been a focus for SigFig. The San Francisco-based startup has already struck similar deals with Cambridge Savings Bank and Bank of the West.
In May, SigFig unveiled its biggest partnership with wirehouse UBS, which also took an equity partnership in the firm. In November, SigFig announced another major partnership with Wells Fargo, beginning with a pilot program to introduce robo advice in 2017 through its community bank unit.
SigFig this year also announced a partnership with custody bank Pershing, and received $40 million in funding from a consortium of investors including Eaton Vance, Comerica and New York Life.
Sha says having the backing of banking and wealth management's biggest names has cemented his firm's reputation among banks seeking to add a digital advice offering.
"We literally can't serve all the people who want to work with us," he says.