Free and Open Source: Can New Startup Disrupt the Robos?
It's a disruptor aimed at the disruptors.
A robo advisor that is free and open source quietly went live last month and may put more pressure in the digital wealth management space with a unique business model that emulates other open source icons such as WordPress or Magento.
Wealthbot.io (or Webo for short) caters to financial advisors and offers the same features as other robos do such as tax loss harvesting, but advisors would not have to pay any licensing fees to use it, unlike white label robos such as the ones offered by Envestnet or Pershing, say Gene and Vlad Kobilansky, brothers and co-founders.
The advisor can just download Webo and own the software from the get go. The financial advisor can then simply hire a developer for a one time fee, much like how people hire WordPress site developers, and customize the platform to his or her needs.
“I am a firm believer in open source. I don’t see shopping carts that much different from a financial platform,” says Vlad Kobilansky, a programmer, comparing Webo to Magento.
And how would Webo make money? Gene Kobilansky, who has worked in financial services, says he envisions his team making a profit by acting as a developer themselves and customizing the robo advisor for each client and also opening a store full of third party apps.
“That’s a way to create value for everybody in the ecosystem,” he says.
It is an intriguing business model, says Josh Lerner, Harvard professor and co-author of “The Comingled Code: Open Source and Economic Development.”
There have been successful companies and organizations built around open source, but few centered around finances or the handling of large sums of money, he says. Usually the programs are proprietary. “It’s creative. It is a little different, which makes it interesting."
Lerner surmises that, if successful, an open source and free robo advisor would raise the pressure other robo advisor firms are feeling as other providers offer ever lower fees.
“It makes it harder for companies to be more successful,” Lerner says.
Gene Kobilansky says he hopes that the open source feature of Webo makes it also a strong selling point to clients and financial advisors.
“Open source is probably more secure than you think. Open source by nature gives opportunities to audit the source code. There is this concept in software that given enough eyes, all bugs are shallow."
It is true that a fresh pair of eyes can make an open source program be less buggy, says Lillian Ablon, a researcher at the RAND Corporation and a cybersecurity expert.
“The truth is in general, whether it’s open source or proprietary, there may be vulnerabilities with whatever info is being passed through,” she says.
Webo was cooked up over the last couple of years by Vlad Kobilansky and several programmers. A former business partner of Kobilansky had approached him to work on the project, but quit, which prompted Kobilansky to take over Webo with his brother Gene Kobilansky.
The brothers put Webo on Github recently and so far the program has attracted more than 400 followers. More than a week ago, Webo was trending on Hacker News and the website drew in about 13,000 visitors.
“It’s certainly exciting people are taking interest in the project,” Vlad Kobilansky says.
The robo advisor is very much a fledgling product. The brothers are looking for funding, putting together an advisory board, and speaking with interested people in the financial services sector.
“We are still looking for that first flagship client,” Gene Kobilansky says. “We are on people’s radar.”