Slideshow Robo surprise: What we didn't see coming

Published
  • June 15 2016, 10:03am EDT
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Digital wealth management: Breaching barriers

Advisers have steadfastly portrayed automated advice as an option for investors who couldn’t otherwise afford their service.

But increasingly, research suggests the wealthiest are interested in digital wealth management, and that advisers quickest to adopt digital advice tools into their practice are getting an edge over non-digital competitors.

UBS' surprise May announcement that it was investing in robo provider SigFig was seen by observers as a sign of Wall Street acceptance of digital advice’s future potential.

Also changing attitudes are the dividends gained by early adopters. BlackRock's acquisition of FutureAdvisor has earned it megadeals this year as a digital provider to BBVA, RBC and LPL.

A number of early predictions have also been upended, including one which foresaw the independent robo model quickly dying off. In 2016, over $200 million in funding has made its way to robo advice platforms. The DoL's fiduciary rule is also providing new prospects for digital-first advice firms.

Advisers, in turn, have begun asking themselves hard questions: How much will robos affect the cost of advice? Can they be fiduciaries? And who should adopt the fastest?

Wealthy considering robos

According to several global studies, the next generation of wealthy clients say they are open to using a robo adviser.

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Wealth allows for curiosity

With more to invest, the wealthiest clients are more readily engaging in digital advice platforms.

Not so fast

The embrace of robos among the rich, however, has been slower in the U.S. compared to the rest of the world.

Big brands go digital

The industry has been paying attention. The most prestigious wealth managers and banks are fast developing digital advice offerings.

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Money in hand

Analysts predicted independent robo platforms would not be able to find additional funding and die off, largely because of increased digital competition from Vanguard and Schwab. So far, that’s not been the case.

Incumbent advantage

Digital-first newcomers have their work cut out for them, though, as established brands have quickly grown their digital offerings. Schwab Intelligent Portfolios is the brand U.S. investors associate most with robo advice, according to MyPrivateBanking Research. (Image: Bloomberg News)

Benefits in change

As firms bring robo options to their platforms, they are encouraging their adviser networks to add digital capabilities to their practice.

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Fee concerns persist

But all advisers are worried that a digital-first model will commoditize wealth management.

Most susceptible to disruption?

Advisers see robos latching onto the same investor sentiment that popularized low-cost index funds, which may have the greatest impact on asset management, according to a CFA survey.

Room to innovate

But some firms are betting millions that robos can develop beyond the standard low-cost ETF base and become a new profit generator.