JPMorgan Chase joined the list of banks adding a robo advisor to its offerings, a year after announcing a partnership to develop its own fintech.

The announcement that it would be launching a pilot early 2018, reported by Reuters, comes at the end of a year that’s already seen robo advice rollouts from Morgan Stanley, Wells Fargo and Merrill Lynch.

But analysts note online advice platforms from banks are just the face of a deeper, more necessary effort to restructure client data and become agile for a digital era. The real value, they note, is being able to link a client relationship lifecycle from retail through private banking and retirement.

“Everybody has their platform in place pretty much at this point; the question becomes how they are developing a proposition to grow it into the fabric of the traditional business model,” says Alois Pirker, research director for Aite Group's wealth management practice. “The end cannot be a low cost minimum investment platform. That’s merely the first step.”

Exterior of JMorgan Chase headquarters
Bloomberg News

JPMorgan Digital Investing is set to go public in March, according to Reuters, with annual fees from 25 to 50 basis points and an investment minimum of $5,000, which may be lower by the time it officially goes live.

The appeal is certainly meant for a lower bracket of investor that’s currently not served by JPMorgan. CEO Jamie Dimon referenced “valued customers” when he first acknowledged the bank could offer a robo-adviser bundled with free brokerage trading last June.

“When you talk about robo and investing, well we can do that, and give it away for free if we want,” Dimon said at an investor presentation in New York.

Though the platform will likely attract smaller clients than traditional wealth management does, the bank can reap real benefits from the service, built in partnership with Los Angeles-based fintech provider InvestCloud, says William Trout, head of wealth management research at Celent.

“It allows them to leverage their massive deposit base and generate a new source of fee income. It also prevents self-standing robo advisors from sucking out assets via [other aggregators],” Trout says. “Plus it offers another entry point to the bank for new customers. They can then be made stickier through aggregation and cross-selling of other products.”

The bank is already following that strategy to reach out to millennials, offering a mobile-only banking app called Finn and launching it in a state where it has no branch presence.

That’s reflective of the real value for banks in digital transformation, says Aite’s Pirker: Any new platform development has to tie into the bank’s existing technological infrastructure through a layer of data.

“Banking is hugely siloed," he says. The fault lines that exist between business units are becoming more apparent to clients, and they don’t want to deal with that. When you open an online brokerage account at a bank, they sit you down in an office, and the door closes. I could go anywhere to do that. So you need a data layer, an engagement layer that runs across the business.”

Wrangling data is the largest benefit for JPMorgan in partnering with InvestCloud, in which it invested an undisclosed sum last year, Pirker added. The cloud-based provider allows a firm to plug in various processes across its broad platform.

“InvestCloud is back office agnostic, organizing data around clients, which is where banks have to ultimately go," Pirker says. "Usually data is organized around execution and getting business done. This lets you be a lot more agile on the front end — you can change around the client need, because the underpinning data is unified. You don’t have to rebuild offerings.”

Still, it may have been a bigger task than anticipated, Trout suggests, questioning the time needed in the digital platform's development.

“I would say [the platform] is more defensive and less offensive in intent, especially at this late stage, when everybody and their brother has or is launching a robo. A separate question is: why did it take them so long to get up and running?”

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Suleman Din

Suleman Din

Suleman Din is technology editor of American Banker and Financial Planning. Follow him on Twitter at @sulemandn.