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The Rich Are Using Robos and That Scares Banks

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Banks are watching wealthy clients flirt with robo advisors, and that's one reason they're racing to release their own versions of the investing technology, according to a consultant.

Indeed, bank chiefs including Morgan Stanley's James Gorman and Wells Fargo's CFO John Shrewsberry have said their firms must develop robos to complement their sales forces.

Customers want both the slick technology and the ability to speak to a person, especially in volatile markets like now, Jay Welker, president of Wells Fargo's private bank, said in an interview.


"Robo is a positive disruptor," Welker said. "We think of robo in terms of serving multi-generational families."

This effort isn't just to attract millennials and small investors, says Kendra Thompson, an Accenture managing director. At Schwab, one example, about 15% of those in automated portfolios have at least $1 million at the company.

"It's real money moving," Thompson says. "You're seeing experimentation from people with much larger portfolios, where they're taking a portion of their money and putting them in these offerings to try them out."

Traditional brokerages including Morgan Stanley, Bank of America and Wells Fargo are under pressure to justify the fees they charge as the low-cost services gain acceptance. The banks, which collectively employ about 46,000 human advisors, will respond by developing tools based on artificial intelligence for their employees, as well as self- service channels for customers, Thompson said.

"Now that they're starting to see the money move, it's not taking very long for them to connect the dots and say, 'Whatever I offer for a fee better be better than what they're offering for almost nothing,"' Thompson says. Technology will "make advisors look smarter, better, stronger and more on top of the ball."

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