The proliferation of digital advice platforms has sparked a new subscription service dedicated to comparing the top offerings from incumbents and startups alike.
Corporate Insight is offering observations on 13 platforms, from Betterment and Wealthfront to Schwab's Intelligent Portfolios and Fidelity Go, based on research gleaned from holding accounts at each provider.
"We wanted to get insights from behind the scenes," says Sean McDermott, senior analyst at Corporate Insight.
The firm compiled a detailed report on every platform based on their account opening experiences. The report analyzes the rigor of the questionnaires, customer service, investment selection and portfolio management.
They also created a template investor across all the offerings: a man in his mid-40's with a moderate risk tolerance, living in New York or New Jersey with $500,000 in investable assets and valued at $1 million in net worth, among other details.
While the firm will keep the full details of their findings for subscribers only, McDermott shared some conclusions — for one, incumbents are far more conservative than younger competitors in the online questionnaires used to generate risk tolerance profiles.
"It's apparent most incumbents are gun shy and compliance weary, and go to noticeably more depth to understand the client's risk profile," he says. "Whereas other firms list a few choices, but no context to make that risk tolerance judgment. It's not representative of the real world."
Despite the heavy emphasis on compliance-related documents, McDermott notes that most platforms allow prospects to check off that they have read disclosures without ever opening the documents.
Not all incumbents are equal in their application of risk tolerance questionnaires, he adds. "Some, we had the impression it was a bit of a rush job."
What impressed his team about offerings from digital-first firms was platform sophistication. "You could tell they've been doing this longer," he says. "They have the benefit of having their service out and live, and they've iterated on earlier designs."
Notable, McDermott says, is that a number of digital-first firms' platforms had features designed to upsell clients on services, whereas there wasn't much marketing or additional upsell built into incumbent platforms.
The goal is not to compare performance of the investments placed with each platform, McDermott says, but rather to have ongoing intelligence on how these platforms develop, acknowledging the digital future of wealth management.
"The incumbents have now really embraced the digital advice business model," he says. "It's one of biggest developments to come out of the financial crisis."
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