Leading robos go dark during stock market plunge
A handful of wealth management websites went dark after a turbulent two days of trading — a possible early warning sign that even relatively new digital platforms can get overwhelmed dealing with high visitor volumes during selloffs.
Fidelity, TD Ameritrade, T. Rowe Price, Betterment and Wealthfront were all either temporarily inaccessible or performing slower than usual over the past two days due to visitor bottlenecks, according to representatives of the firms. The access delays have now been resolved and were not the result of malicious activity, they added.
“We’ve seen unprecedented client activity over the last few days,” a TD Ameritrade spokeswoman says. “We have redundant systems, and capacity and resiliency of all systems is a top priority.”
Fidelity experienced “intermittent technical difficulties,” it said in a statement after its website went offline Tuesday, while clients at TD Ameritrade experienced “slowness” according to the firm.
“Purely digital advice — with no human interaction — is sort of a bull-market-type solution,” says Jeff Liguori, New York regional manager with People’s United Wealth Management. “What happens when there’s real market dislocation?”
The technical issues came after the market plunged 1,175 points on Monday — the largest one-day drop in history — leading to heavy visitor volume at Betterment and Wealthfront, according to the firms. Vanguard and Charles Schwab also confirmed website outages on Monday, according to the Wall Street Journal, although representatives of the firms did not respond to requests for comment.
“Due to particularly high volume, clients experienced log-in issues for approximately thirty minutes,” says a spokeswoman for Betterment. “Accounts were secure throughout and portfolio management activities like rebalancing and tax loss harvesting continued.”
Betterment is still criticized for its decision to temporarily suspend trading the morning after the Brexit vote without consulting users — a move that angered retail clients and advisors alike.
“Well, this is round two for Betterment,” says Will Trout, senior analyst from Celent. “Financial services firms cannot afford the perception of shaky legs, especially when they've built a retail footprint. Sizzle sells, but stability tells.”
Industry leaders voiced their concerns about the technical glitches. United Capital CEO Joe Duran suggested they would be more harmful to digital-first firms and raise questions about reliability.
"It's a much bigger issue for younger firms that do not have the goodwill and trust of a known brand and institution with decades of history," Duran says. "It's a big issue in the minds of clients, more than an operational crisis."
But the hiccups could also be a sign that digital investment platforms are simply experiencing growing pains, Liguori says, and may need to be tested more rigorously before they operate in another large market downturn.
“Like any disruptive type of business, it’s an evolution. The technology needs to be tested overtime,” Liguori says, adding that the platforms were widely introduced after the 2008 recession and have not been tested during large market upheavals.
“It’s funny that it’s always the direct-to-consumer models,” says Jimmy Lee, CEO of Wealth Consulting Group, adding that human advisors have the advantage of hand holding clients during volatility. “You would think advisors are able to talk their clients off the edge.”
Client frustration at being locked out of accounts was highly visible on social media.
“What a disgrace,” wrote Twitter user @walshfam_ire about the Fidelity shutdown on Tuesday. “Called customer support and all they could say was too many people at once. Time to find a trading platform that has the capacity.”
While advisors were likely out in force calming investor nerves during the selloff, some extolled the human touch over automated advice. “Guess who didn’t call me today?” quipped Sean Walters, CEO of Investments and Wealth Institute, on Twitter. “My robo advisor.”