Pierce: “Robo-Advisors…the Apple Watch of wealth management”

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Have you met face to face with your Robo-Advisor lately?  While that is a facetious question from someone who believes in the power of relationships and working with people, the Robo movement shouldn’t be overlooked.

For those that have not been paying attention, Robo’s are growing like weeds – proliferating with what seems like a new start up each week.  Robo’s offer low cost investment advice centered on technology.  They attempt to deliver money/asset management leveraging technology to the masses. They mainly use algorithms to make investment decisions. The allure, especially to millennials, is the on-line focus, low minimums and low fees.  Most of these start up’s also have robust, easy to use web sites and mobile apps.

Think of a Robo as a wearable tech item like the Apple Watch.  The core to the Apple relationship is the iPhone.  The Apple Watch is the new add-on.  You, as a Financial Advisor, are core to a relationship – the iPhone. Your Apple Watch just arrived.  While you may think the Apple Watch is a fad, it is not going away. The analogy is simple – you need to understand Robos and what they can mean to your practice because they are not going away.

According to Corporate Insight, the total assets managed by 11 leading Robo-advisors reached $19 billion near the end of last year. Assets at these firms were up over 65% since April, 2014. The leading firms are Wealthfront ($2.2 billion in AUM); Betterment ($1.3 billion in AUM) and Personal Capital ($1 billion + in AUM.) By the way, Personal Capital is now available on the Apple Watch – really!

With Charles Schwab unveiling their Schwab Intelligent Portfolios, they have entered the Robo fray in earnest and will dwarf competitors assets in short order. They brought in $1.5 billion in six (6) weeks! Read Schwab is clobbering …

Raymond James, the very hot dot in our industry, just finished their conference in Las Vegas. Scott Curtis, President of Raymond James Financial Services, made a few comments that most of us are aligned with: “We’re betting on financial advisors and personalized financial advice delivered by people.” He also went on to say that technology can propel us forward as our industry continues to evolve. Robos may eventually help you …if the firm you work with is smart about evolving their tech. Here are a couple of ways they could help you:

  • Provide asset management to smaller accounts
  • Help you gain scale while not diverting attention from your HNW HH’s
  • Increase your reoccurring fee based business – 25 basis points is better than 0 basis points!
  • Keep the millennials. One day they will realize that a relationship with a human being is critical as their life becomes more complex and they have accumulated “real money.”

It will be very interesting, and only fair, that the Department of Labor also weigh in on the Robo trend.  Fiduciary Standard = Double Standard. Is a Robo a fiduciary?

Think of the Robo as your new wearable tech.  They will not take over the industry or replace great advisors, but they are not going away. Thank You for reading the work. JRP

John Pierce spent more than twenty years at Merrill Lynch and Ameriprise. He earned his MBA from The University of London and lives in Philadelphia. For less than the cost of your next grande non-fat latte you can download his e-book from Amazon and pick up the paperback for team members Sell More and Sleep at Night.


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