Wells Fargo's new hybrid robo advisor enters the digital advice space facing a number of challenges.
Wells’ Intuitive Investor is more expensive than similar offerings from Merrill Lynch or Fidelity, with a $10,000 account minimum and advisory fees of 50 basis points (there’s a 10-basis-point discount for some existing Wells clients).
It’s coming much later to market than offerings from other investment firms and fintechs, which have had the chance to grow their share and gain recognition. In the same time, a new breed of microadvice apps has emerged, aggressively courting millennials.
Also, the smoke has not cleared from the bank’s fake accounts scandal, which executives acknowledge adds another barrier to trust that goes with any new digital financial service.
But there is strength in numbers, says Jon Weiss, head of wealth and investment management at Wells Fargo, noting that the 22 million Gen X and Gen Y clients with Wells bank accounts and loans represent an advantage.
“If you buy into the idea that these Gen X and millennial customers want to reach out to financial services the same way they reach out to everything else in their lives, we didn't have until now the right offering to reach them for investment purposes," Weiss says. "This fills a void we think is really important."
Just like the roll-out of its new AI-powered mobile banking app, Greenhouse, the premise of Intuitive Investor is to get investors early in their financial lives, says Eddie Queen, head of digital and automated investing at Wells Fargo Advisors.
“They’re more open to having an institutional relationship, they may want a dedicated advisor in the future,” Queen says. “Our largest competitive advantage is the chance to help millions of our retail clients improve their financial lives. Planning is the first step in that direction.”
TODAY'S CLIENT WON'T WAIT
The robo advice platform, the banking app and other digital-first offerings from Wells, such as a virtual banking assistant on Facebook, are an acknowledgment that the banking and investment client is changing, Weiss says.
“In the old days, the branch was open when it wanted to be open and customers had to wait in line with not a lot of alternatives,” he says. “Then came ATMs, the internet and mobile. Today’s customer isn’t going to wait in line for service or human interaction.”
The initial digital advice offering will be made up of passive ETFs from BlackRock, Goldman Sachs and Invesco PowerShares, Queen says, adding that while Wells Fargo Investment Institute determined which funds to use, the bank’s own mutual funds were intentionally excluded for objectivity. (The funds will average about 15 basis points in fees, which are separate from the hybrid's advisory fee.)
Unlike some industry offerings, Intuitive Investor clients will be able to make unlimited calls to one of three call centers supporting the hybrid in Salt Lake City, St. Louis and Charlotte, North Carolina. Clients will be guided to more traditional wealth management once their assets and issues exceed what the platform can service, Queen says.
San Francisco-based SigFig developed the robo platform with Wells, Queen says, and its primary contributions are in the onboarding experience, the algorithms managing account rebalancing and tax-loss harvesting, and the digital client communications. (SigFig is also building out a platform for UBS.)
There could be further integration with the Greenhouse banking app and new features will be added over time. “Maybe we'll develop capabilities ourselves, partner with a fintech and sometimes we'll just go out and buy it; we have that flexibility,” Weiss says.
Competitors have already gone through the roll-out and refinement process though, and are building assets under management and client bases.
Vanguard’s Personal Advisor Services is poised to cross the $100 billion AUM mark, while Betterment, the leading independent platform, is over $11 billion. Trading app Robinhood recently passed 3 million subscribers, while Stash Invest recently announced it will offer banking to its investment clients.
Quote“I'm less worried about losing to Merrill than I am losing to another robo."
Acknowledging the competing robo advice offers already online, Queen says Wells is “a couple of months late to the game,” but it was focused on tapping its pool of retail clients, and then seeing how it would appeal to investors outside that circle.
“The competitive landscape in the brokerage space changed over the last 20 years and now there are different ways to invest,” he says. “We want to be part of that.”
Weiss adds that, unlike its peers, it sees younger, nimble fintechs as a greater threat to its client base. “I'm less worried about losing to Merrill than I am losing to another robo,” he says.
Much concern has also been given to Wells’ own brand reputation, both executives say.
Weiss explains that Wells Fargo brought in a third-party examiner to go over every aspect of its businesses to identify improprieties.
“There’s no question the company has to re-establish trust, what we don't know is how much of that is millennial-focused,” he says. “But everyone is committed to rebuilding that trust and realistic that it takes time.”
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