Could there be any clearer sign that wealth management is being commoditized than Overstock.com offering robo advice?

“Unbiased artificial intelligence drives financial advising,” the e-commerce giant declared on Wednesday, a statement it obviously didn’t run past NAPFA.

Immediately, financial advisors reacted on social media with obvious jeers and puns. No doubt, it’s hard to resist pointing out this is Overstock.com, after all, the same dot-com you might check out when you’re looking for affordable furniture, a coffee maker or a new handbag; the same dot-com that had the actress on TV telling you why "it’s all about the O."

But consider how quickly the robo advice model has evolved, the implications of what it means to democratize financial advice and the crusading motivations of Overstock’s CEO, and you might want to reel in the jokes.

Put it this way: You were thinking about the wrong online retailer and the wrong tech entrepreneur crashing wealth management.

“Sneer as they may, I would love to compare alphas,” says Overstock.com CEO Patrick Byrne, after learning about RIAs throwing his new robo some shade. “What they are missing is that we have as many as 40 million unique visitors per month, and they trust us.”

Old-school RIAs are in no danger of losing well-heeled clients to Overstock’s robo offering. It’s pretty generic as far as automated investing goes.

For one low, low price of only $9.95 a month — and the first month is free — Overstock touts customers with no account minimum can be sorted into a scored portfolio belonging to a range of three investor profiles: conservative, moderate and aggressive. Or, they can mix and match and make their own portfolio. It’s a simple, two-step questionnaire to get in. The portfolios are made up of company stocks, not the ETFs that other robos usually offer. Byrne calls the portfolio “a personalized ETF.”

(If you’re reminded of Hardeep Walia’s Motif, you’re not far off. Motif’s investing service also charges a monthly subscription fee and puts investors into actual stocks, but offers far greater investment customization and considerable research capabilities.)

Patrick Byrne, CEO of Overstock.com
“We have as many as 40 million unique visitors per month, and they trust us,” says Overstock.com CEO Patrick Byrne. Bloomberg News

Overstock’s robo doesn't currently support employer retirement plans, but that integration is coming soon, the company says. There’s no CFP-staffed call center waiting to take your call right now either; all the investments are handled via AI and algorithms, courtesy of Wellesley, Massachusetts-based analytics shop FusionIQ.

Naturally, Overstock is relying on Apex for brokerage and clearing. (Its robo offering's website gives a shout-out to wealthtech homies: “As a first-mover in the fintech space, Apex has become the custodian-of-choice for tech-savvy firms like Betterment, Stash and other financial disruptors.”)

But the company is counting on exploiting a blind spot in the financial services industry from which it has managed to profit handsomely in retail. “Swanky financial advisors serving the wealthy are not our natural target," Byrne says. "We intend to serve the mass of middle- and upper-middle-income females who shop on our site.”

These are the very women to whom wealth management only pays lip service, if you believe the industry’s critics, despite such women controlling much of the $14 trillion in assets that the industry likes to cite in promotional material. Byrne, by contrast, has long touted the buying power of women, and Overstock was a pioneer in catering to their specific shopping habits and needs.

So without having to pink it and shrink it, or post inspirational blogs on LinkedIn, Overstock’s robo at launch already has access to a moneyed female clientele — an estimated two-thirds of the retail site’s shoppers. The logic being that if they trust Overstock to save them money on purchases, they might trust the company to help them save money for retirement, too. The robo plugs into Overstock’s existing financial-services hub, touted as “a one-stop source for brokerage and advising products, lending products, credit card products and insurance products presented by various financial institutions.” If robo advice, from the perspective of traditional wealth managers, opened a Pandora’s box full of small first-time investors, Byrne’s robo advisor wants Pandora herself to open an investing account.

“We are turning our relationship with our customers from being about selling them a sofa, to being a trusted financial relationship where we can help them plan and manage their financial lives better,” Byrne says.

Will such a pitch work? The market will wait and see. The robo's quick questionnaire will be open to scrutiny from critics who worry such portfolio allocation does more harm than good by failing to provide thorough and appropriate risk management. Also, in the past, retailers selling wealth management was a concept that didn’t take off — some may still remember Sears and Dean Witter’s much-mocked ‘Socks and Stocks.'

But even if Overstock doesn’t get far in its robo venture, it certainly provides a model for other nontraditional players to try their hand at offering automated wealth management to the masses they serve.

It’s important to note that this is, finally, the democratic ideal of investment digital advice originally set out to accomplish after the 2008 financial crisis. It’s only taken three iterations of digital advice to get here.

There were the original robo advice startups that shocked the wealth management industry into action with their slick, digital interfaces, modern onboarding and upstart attitudes. Then the industry pushed back, with banks, custodians and wealth management firms rolling out digital platforms of their own, largely focused on converting existing do-it-yourself clients. While the opposing sides occasionally squabbled over who would survive and capture the next generation of investors, microinvesting apps ingratiated themselves with the millennial market.

Though each wave claimed some market share, digital platforms have yet to dominate the market. Yes, they are expected collectively to reach up to $4 trillion in AUM by 2022. But that will still be a drop in the overall investment assets pool. Let’s not forget, too, that for most investors robo advice is still an unknown concept. Industry study after industry study demonstrates that most Americans aren’t saving enough for retirement, if they are saving at all. But they are shopping online — two-thirds of all Americans, actually, and we spent $2 trillion online just last year.

So now we come to the fourth iteration of robos, and it’s all about strategic placement. How far can a discount retailer that raked in $1.8 billion in 2016 get in trying to bring wealth advice to the public? Byrne is optimistic about his chances.

If there was a wealthy tech CEO who’s got something to prove to Wall Street, it’s Byrne. There’s a long history there with its own wiki to peruse. But it is noteworthy that tZERO Advisors, which will power Overstock’s robo, is a branch of tZERO, the majority-owned subsidiary of Overstock that serves as an alternative trading system. TZERO wants to create a new kind of market, powered by blockchain technology.

Speaking with American Banker recently, Byrne explained that tZERO is building out a number of ventures. “We are right at the crossroads,” he said. “People don't see our business plan yet. You'll see some crazy stuff unfold over the next few months.”

When Financial Planning asked about the financial regulations and scrutiny that have scared other retailers away from wealth management, Byrne was clear, if brief. “We are doing our work through regulated entities and are super-cognizant of our obligations there,” he says. You can review the tZERO robo’s Form ADV here; it is registered in Massachusetts, the one state whose securities regulator is taking a hard line on automated advice.

As with any development in digital advice, this new wave is not about the first company to catch it; it’s about what comes next. It has long been speculated that Silicon Valley tech giants might try to dip their toes into wealth management. But surprisingly, instead of Google and Amazon it’s PayPal and now Overstock that have launched robo advice offerings.

The opportunity to bring financial advice to the masses is wide open, says Byrne, who points out that Overstock is the first major online retailer to enter the space.

“I do not see anyone else making these moves,” he says. “But if you look at recent announcements, you will notice a pattern: we are buying and integrating different parts of Wall Street to create an ecosystem with reduced fees and better and less expensive wealth management than anything we see in the market.”

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