Online lender Social Finance joined the industry's growing hybrid robo adviser ranks with an entry that adds a new layer of competition for millennial clients, observers say.

Its platform, SoFi Wealth, had been in beta since last year, available to those who already have a student loan, a personal loan or a mortgage from the San Francisco-based company.

On Tuesday, the lender opened it up to anyone with $500 or depositing $100 a month, with no fees for the first $10,000 and a 25 basis point fee for higher balance accounts. The service is free for SoFi borrowers.

SoFi Wealth's ideal client is in their 30s and earning a good salary. “They want to be all things financial services to the future 1%,” said Brendan Ross, the CEO of Direct Lending Investments, a firm that purchase online loans.

SoFi also launched a mobile app to coincide with the automated ETF-investment platform, and is adding workers at call centers it operates in California and Utah.

The privately held firm, which launched in 2011 with a focus on refinancing student loans, is planning to start offering credit cards and deposit products later this year.

"Fundamentally we’ve been a transaction-oriented business," said John Gardner, the general manager of SoFi Wealth. "We have this ambition to provide a much more robust suite of products for our customers."

'CHANGE FROM ALL DIRECTIONS'
The offering merited praise from industry observers, who see the launch as another example of the constant pace of change in digital wealth management.

"This space is getting more diverse, and change is coming from all directions," says Alois Pirker, research director for Aite Group's Wealth Management practice.

Pirker notes how not only major firms such as Wells Fargo have launched hybrid robos, but also established back office service providers have come around to the digital advice model and are moving into a supplier role.

There are already various efforts to students and digital wealth management. Wealthfront offers college saving plans, while SoFi's competitor, CommonBond, has a friendly relationship with Betterment.

The challenge for firms in the space, Pirker says, is how well it can blend an engaging front-end user experience with deep advice capabilities, all of which can be scaled.

"The classic ETF wrap offering is not what's going to take a firm far anymore, and that goes for B2B and B2C," Pirker says. "Where do you take the proposition from here?"

MILLENNIAL ADVANTAGE
Every wealth management firm that's launched a digital advice platform or announced plans to do so have cited catering to the millennial investor as one of the primary reasons for doing so.

When it detailed its robo advice offering, Wells Fargo said it was "primarily designed for next generation investors."

But combining a ready-made young client base and wealth management gives the SoFi offering a leg up in the race to claim millennial clients, as it vaults over the demographics' issues with trust and commitment.

"SoFi has credibility with its client base," says Chip Roame, managing partner of Tiburon Strategic Advisors. "SoFi has the ability to link together its loans and its wealth management, [with] little to no client acquisition costs, generally the highest expense for robo advisers. Its earlier move into mortgages was savvy for many of the same reasons."

Roame notes that SoFi's virtual advice service demonstrates how the call center model can be put into effect in wealth management to keep overhead costs down.

"Access to unlimited adviser time via email or chat is not really that expensive to deliver," he says.

Offering student loan refinancing puts it in front of millennial clients long before they consider wealth management options, at the moment of their first big financial decision, says Lex Sokolin, director of fintech strategy at Autonomous Research.

"SoFi has a natural advantage around the life event of paying off student debt, because there is an immediate value to refinancing that decision," Sokolin says.

"That is by far their biggest business and brand. It would follow that if your demographic has a relationship with the company for student loans, that defines your demographic to be in the right age mix for investing online."

'EXPECT MORE OF THIS'
The crossover of an online lender into digital advice is part of a larger trend of advice being built into every aspect of the industry, says Kendra Thompson, managing director and head of Accenture’s global wealth management practice.

"Everyone across financial services, be it a standalone lender, an asset manager or a wirehouse, is looking to extend their business with digital advice, and layer in wealth management," she says. "Expect more of this."

It's possible because digital allows for advice to be scaled and tailored to fit an entity's offering, she adds.

"This is the concept of tailoring advice for your core competency," Thompson says. "The way an insurer adds advice, it will be more toward protective offerings. For a retail banker, it will be advice toward debt or a home purchase."

As for capturing millennial investors, Thompson says much of the wealth management industry has to recognize they are approaching financial advice differently.

"They dip in and out of service, and are not tied down," she says. "They are predominantly in the here and how, focused on the shorter term horizon. They also feel the traditional industry is quite judgmental when talking about retirement, especially when many are struggling with student debt.

"Stop telling millennials what to do, give them the tools to let them drive the interaction. Don't limit their abilities to get access to human advisers. They will absolutely want that, but they may not want to do it in the construct of a multi-decade relationship."

With files from Kevin Wack.

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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.