WiseBanyan's rebrand is more than just a robo exit
WiseBanyan has finally changed its name months after an acquisition by Axos Financial, the $11.2 billion national financial services provider.
Axos purchased the platform and its $153 million in client assets in March, and plans to integrate the robo advisor into the firm’s pre-existing digital banking platform that offers checking, savings and lending services, says Axos CEO Greg Garrabrants.
Although the new Axos Invest will continue to provide financial planning services with no fees or minimum balance requirements to clients, the rebrand is an example of increased competition as larger incumbents enter the fray.
“Over time, we see tremendous opportunities to expand the breadth of services to retail and high-net-worth investors, registered investment advisors and strategic partner,” said Garrabrants in a release.
WiseBanyan will operate at a loss of approximately $3 million to $4 million in the next year, according to Garrabrants in an earnings call. The losses are a "conservative number" while Axos scales the platform.
"Calling it an acquisition is fine in the sense that we did get a customer base and we hired a small team of people," he said. "But the reality of it is it was sort of an acqui-hire with a nominal cost of acquiring a technology that cost 10 times what we bought it for the build. So [t]hat's about the negative run rate right now currently on the operating side."
WiseBanyan’s acquisition is just one example of an increasingly crowded landscape for independent robo advisors as traditional wealth management firms enter the marketplace.
Assets managed on digital platforms are expected to rise to almost $1.3 trillion by 2023, according to a report from Aite Group. However, startups are projected to see a significant slowdown in digital AUM growth over the same time period, while brokerages such as Schwab and Fidelity pick up market share.
For the independents, assets are expected to drop to 6.6% of total digital assets by 2023 from 15.9%, due to an increase in consolidation and high client acquisition costs, according to the Aite study.
Wise Banyan is not the only independent robo advisor to get swallowed up. In 2015, the nation's second-largest life insurance company, Northwestern Mutual, bought LearnVest, an online financial planning start-up. LearnVest, founded in 2009 by Alexa Von Tobel, was initially created with the target audience of young, female clients who need help setting up budgets, paying off debts or setting up their 401(k) accounts.
By 2018, the platform discontinued its planning services and online investment tools.
In order to succeed, startups will have to differentiate themselves from competitors through innovation, analysts say. Being relatively small may allow them to focus on the needs of niche clients with specific demographics.