Intelligent Advisor

Robo Advisor Assets Up 37%

So called “robo advisors,” startups that have made big bets that individual users will increasingly get financial advice, portfolio strategies and clear performance metrics directly from online platforms, are gaining steam. Assets in these platforms grew 36.5 percent in the last three months to a total of $15.7 billion, up from $11.5 billion at the end of March, according to a recent analysis by Corporate Insight.

Grant Easterbrook, analyst at Corporate Insight, tracked 11 leading startups in the space, including Assetbuilder, Betterment, Covestor, FutureAdvisor, Personal Capital, SigFig and Wealthfront, to name a few. 

For some, this trend heralds the demise of the flesh-and-blood financial advisor, an unjustified fear we have written about.

“All these new startups aren’t going to turn the world upside down tomorrow or this year,” Easterbrook said. “But look at the long-term trends here: Gradually baby boomers are retiring, and over time, firms that want to win new business will have to shift prospecting to more tech-savvy, Gen X and Gen Y clients.”

With many established financial services firms, their websites and mobile apps aren’t very modern or user-friendly, and they’re not very transparent online—important factors for next gen investors, he added.

“If you think about the key tenets that make a good online-focused investment advice solution, it’s modern and user-friendly websites, low cost, low minimums, transparency on performance and fees,” Easterbrook said. “What Gen X and Y will likely want sounds a whole lot more like what these new guys are doing.”

But a market downturn could cause a shakeout in the online advice space, Easterbrook believes.

“But that will be the biggest challenge to this model here—if you don’t have a human touch,” he said. “It’s hard to come up with some kind of automated solution to address human emotions.”

Some robos are preparing to go “swiss army” if the market tanks.

“Basically having all employees ready that if there’s a sudden market event or crash and customer service volumes go way up,” he said. “It really comes down to being prepared to handle high call volumes when it happens.”

Discuss this Blog Entry 1

on Jul 29, 2014

Financial advisors concerned about the rise of "robo-advisors" impacting the industry should look at Upside (disclaimer: I'm the co-founder and President).

We are a fully-automated, white-labeled managed account platform that allows investment managers to compete for the next generation of customers--Gen X and Y clients as mentioned in this article.

We provide a whole range of services (paperless account opening, goal-oriented plan creation, portfolio selection and automated rebalancing) in a design-led, intuitive interface for both clients and advisors. Best of all, it will be labeled under your firm name, logo and color scheme.

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Diana Britton

Diana Britton is the Managing Editor of and REP. Magazine, covering asset management and independent broker/dealers from all angles. A native of Los Angeles, she now lives in...

Ryan W. Neal

Ryan W. Neal is an associate editor for Originally from Sacramento, Calif., Ryan studied English and philosophy at UC Santa Barbara and found his way into journalism. After...
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