Motif CEO Hardeep Walia challenges the transparency of currently available ESG funds. (Bloomberg News)
Motif CEO Hardeep Walia challenges the transparency of currently available ESG funds. (Bloomberg News)

Is it time to scrap the term robo advisor?

Industry hype, negative images of robot overlords and connotations of a mechanical service free of human input are reasons why the phrase doesn't compute, some fintech observers say. And also perhaps why a few companies are rejecting it outright.

At Tuesday’s Exponential Finance conference in New York, the founders of two prominent digital wealth management firms tried to distance themselves from the term, though automated investment advice is baked into the DNA of their business.

“I am tired of the whole robo thing,” said Hardeep Walia, CEO of Motif Investing, during a panel when asked about how millennials invest.

“We are not a robo advisor,” said Bill Harris of Personal Capital at the two-day conference, which was hosted by CNBC and California-based Singularity University, an institution that provides classes and courses on cutting-edge tech and hosts a start-up accelerator for the new wave of disruptive businesses.

In the strictest definition, a robo advisor is a digital wealth management service, powered by algorithms, that oversees an investor’s portfolio with little human input. Wealthfront, which has attracted Facebook millionaires, is a prominent example.

But robo advisor has broadened to be a catch-all term that has included over time any digital-first wealth management firms, though they offer varying levels of access to a human financial advisor.

Harris has often taken pains to emphasize that Personal Capital is not solely a robo advisor because it employs financial managers based in San Francisco and Denver to help clients.

The robo part: customers also have access to a clean, digital interface and software that generates investments plans and analysis. Fintech commentators have called firms like Personal Capital a robo-hybrid advisor service. Despite Harris’ protestations, Personal Capital is often lumped with other pure robo firms in the popular press.

“It indicates a general interest in the use of technology in financial services,” Harris said about Personal Capital getting the robo label. “It is better understood than a year ago,” he added about how the firm has differentiated itself from other computation-driven wealth management companies.

Walia, whose company builds a basket of stocks organized around subject themes and has a social networking element, previously told ReInvent Wealth that "the idea of robots winning over humans is silly."

"Financial advisors are providing high-tech and high-touch advice. Robo advisors are high-tech without being high-touch," he said. "Platforms like ours can make financial advisors’ job easier, although [online advisory platforms] will drive fee compression, and advisors need to be prepared for that."


At Tuesday’s event, where many speakers extolled the virtues and changes that disruptive tech would wrought, Motif Investing and Personal Capital were seen at the forefront of a new type of digital wealth management company because of their interesting business models that are not just built around the best algorithmic formula, some attendees said. Robo advisor is too broad a term to describe some of these new digital wealth management companies.

“We are only at the very beginning of it,” said Stephen Grant, vice president of strategic initiatives at Gibraltar Ventures, Prudential’s venture capital fund and innovation lab, about the digital wealth management space.

“I think the plain-Jane, one-size-fits-all robo investment is why it’s getting a bad rap. It sort of sounds like we will still manage your money, but we are not even going to give you the service we used to give you. And so that’s where you get the feeling of organ rejection you might have gotten in the room and why nobody was really touting that. While 18 months ago, you had people saying, 'We are robo advisors too!'”

“Robo advisors -- part of why they have gotten a bad rap is because in some ways it was a hyped term. And we are on the down side of the hype cycle with that right now,” Grant said.

“They (robos) have become investment’s version of being put on hold at a call center.”

Zachary Karabell, head of global strategy at Envestnet, agrees that robo advisor has become a convenient catch-all phrase and conjures up images of people being replaced by robots. In the present and immediate future, he said, most clients will feel better served by a combination of traditional financial advisors with automated help.

That's partly why Envestnet earlier this year bought Upside, a robo advisor company. In return for an undisclosed sum, it gained a platform for its client base of financial advisors who want to compete against the digital upstarts.

The march of progress and ever more automation will continue, Karabell added.

“Every year, everything we do will have aspects of greater automation,” he said. “Some of it will create more complexity that will require more people to explain it. Some of it will require greater simplicity that requires less people to do it.”

Brett King, co-founder of Moven, suggested robos should be replaced with the term “smart investing” or “investing 2.0.”

But whatever their label, they are here to stay and may someday supersede their human counterparts when artificial intelligence becomes a reality and is used in the digital wealth management space, King said. Then, he predicted, the traditional advisor would be in trouble.

“I don’t think we should fear that these robot overlords will take over the world. I think the biggest risk is we are going to fall in love with them.”

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