When Wells Fargo reported its quarterly earnings on Tuesday, chief financial officer John Shrewsberry said the bank is developing technology for its advisory business, including a potential automated investment tool.
Joe Nadreau, the head of innovation and strategy for Wells Fargo Advisors, spoke with WealthManagement.com about how his team may incorporate a robo-advisor.
This conversation was edited for length and clarity.
Joe Nadreau: If you ask me straight out, ‘Do I think automated investing is going to become a component of every large firm?’ the answer is going to be ‘Yes.’ I don’t know how it cannot. It is a more efficient way to deliver asset allocation and diversification, which is an ultimate goal of what we want. There are investors across every affluence spectrum, every age spectrum that are not in well-diversified asset allocations that are aligned with their investment objectives and risk tolerances. It’s universal.
I think that we’re having that conversation, as I think everybody else is having that conversation. I think that at the end of the day, the firm that is going to win is the firm that says, ‘how do I effectively complement personal advice with better technology?’
WealthManagement.com: Where are you at now with a potential automated investment tool?
JN: We have simplified versions of it. It depends on where you put it. What I mean by that is, [we] already have technology out there today that can say, ‘Hey, let us ask you a few simple profiling questions. Let us recommend a target date allocation fund that we’ve vetted. Let us tell you what your asset allocation should be based on your risk tolerance.’ Through our advisor platform today, we have very simplified mutual fund programs.
That’s what is kind of ironic about these things. We already have the foundation of the managed money platform and the research and the asset allocation and a lot of what these smaller, venture capital-backed firms are doing. We have huge departments around that, we just kind of need to pull it all together and figure out how we want to go to market with it.
WM: What has been the biggest challenge in developing it?
JN: We’re not a Betterment or a Wealthfront, where we’re going say, ‘Our minimum is $500,’ and that’s where we’re going to go. We have to figure out how it’s going to work for the $500 investor and the $50 million investor.
I think that we’re being a little bit more methodical and strategic about how that’s going to fit.
WM: Where will something like this be housed?
JN: I imagine it’s going to be a new arrow in the quiver of brokerage and investing that’s going to be able to be offered to the community bank.
WM: Is there a model out there that you see doing it well?
JN: I think that it’s kind of a combination of a lot of them.
I think what’s likely going to happen is you end up seeing something to the effect of the community bank client who has enough in their checking and savings account that they’re ready to take their first step into a simplified ETF and mutual fund investment. It might go from a more automated solution to a diversified portfolio and then over time as they grow in affluence their needs of guidance and advice will go up.
WM: Will the firm build the technology internally?
JN: I would say we are going to look at every possible option—partnering with someone, acquiring or building it ourselves. As we figure out our strategy, what we don’t want to fall victim to is buying somebody and then trying to jam it into our strategy. We want to come up with our strategy and then find a partner that we can work with in one way or another or build it.
