Slideshow Digital wealth rivalries intensify

Published
  • September 07 2016, 11:22am EDT
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Digital wealth's next phase

Clear leaders have emerged from the ever-evolving digital wealth management space. Vanguard's Personal Adviser Solutions stands apart with over $36 billion in AUM. BlackRock's FutureAdvisor, meanwhile, can now count four major institutions as clients, the latest being US Bank.

But competitors are pushing for more growth, attempting to capture a share of what Deloitte predicts will be $7 trillion in robo advice assets by 2020.

Vanguard's competitors, which include Schwab's Intelligent Portfolios, Betterment, Wealthfront and Personal Capital, have all posted AUM growth of over 40% since the end of 2015. And despite BlackRock's early dominance among institutional clients, SigFig has made gains, such as partnerships with UBS, Eaton Vance and Banco Santander.

The need for continued growth and new assets has digital wealth firms pushing into new ground and developing new offerings. Betterment's partnership with Uber highlighted the need to pursue nontraditional wealth management clients. Another robo adviser, Hedgeable, plans to offer loans as an asset class.

What's shaping up to be a battleground is the 401(k) space. Betterment and blooom have demonstrated an ability to gather accounts. In response, incumbent firms have developed their own digital platforms or acquired them, such as TIAA's recent purchase of MyVest.

Individual advisers and others employed in the financial industry will likely be challenged in their own work as well. Many may soon have to adapt— either learning new skills or changing roles — as the hybrid robo model couples with advances in cognitive computing.

Growth of robos

Though Vanguard quickly secured itself as the leader in digital wealth management, its rivals have continued to grow through aggressive marketing and partnerships.

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Weigh in

The advantage in digital wealth management, though, is still heavily in favor of the established brands.

Wider sweep

A deal between Uber and Betterment is deemed by observers a marketing coup for the robo adviser and a natural alliance. But it raises a question: Are digital-first advice firms better positioned to gain clients in the near future, when Intuit predicts nearly half of the workforce will be self-employed?

The go-to play

BlackRock's domination of B2B robos continues, though industry observers caution that success could be curtailed if its institutional clients do not gain traction with their digital offerings.

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Digital competition's next battle

With the recent fiduciary rule and a shift to low-cost passive investing, the retirement space has attracted new robo adviser competition. A jockeying for assets, as first happened in the retail wealth management space, is expected.

Industry stalwart

Raymond James has repeatedly stated the technological innovation it is seeking in wealth management is not aimed at competing with its own adviser force.

Digital conversion

Some advisers, however, are fully embracing digital wealth management technology, seeing it as a means to affordably increase client scale and AUM.

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Call center adviser

Many industry insiders anticipate that the hybrid robo model will become dominant. But are advisers prepared to work in roles similar to client support, with little personal contact?

Cognitive computing's rise

Another emerging challenge to advisers is software built to emulate how humans think, converse and apply a level of critical thinking that would challenge the notion of an unemotional machine.

Humans obsolete?

The potential for this software creates real concern.