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In robo-CEO vs. Twitter gadfly battle, it was no contest as Wealthfront's Andy Rachleff does 'ultimate flip-flop' without tweeting a reply

The $10-billion robo-advisor may weather 'PR nightmare' but not thanks to Rachleff's 'Vanguard' explanation, critics say

Author Lisa Shidler April 25, 2018 at 12:03 AM
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Andy Rachleff says his firm's price drop is an act of conscience reflecting the good example of Vanguard Group. Some find the explanation hard to stomach.

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UBS bets its 'wealth' future on ex-Schwabbie Naureen Hassan, a corporate digital A-lister, who analysts give a fighting chance to transcend PaineWebber's ossified culture

Still a $2-billion cash-flow cow, the Swiss bank's 6,000-broker, US-based wirehouse is milking aging broker relationships with aging investors but needs a new kind of human presence, empathy, mindset and smarts to draw in Gen Z.

July 16, 2022 at 1:35 AM

Wealthfront's unlikely tapping of Sheila Bair and Tom Curry signals likely push to gain a bank charter, analysts say

The Redwood City robo-advisor's addition of two renowned former chief banking regulators brings legitimacy and guidance that could lead to a margin-fattening bank charter and help solve the robo-advisor's problem of high client acquisition costs.

December 31, 2020 at 4:37 AM

Alan Moore is the No. 2 busiest man in the RIA business and he just convinced the No. 1 busiest man to budget $200,000 to hire a 'rockstar' to replace him

Alan Moore is CEO of both XY Planning Network and AdvicePay -- and he has three young kids; Michael Kitces agreed to let him hire a full-time replacement CEO for AdvicePay -- with some giant reqirements for the new exec.

February 14, 2023 at 3:15 AM

Five RIA Doubletakes: An RIA-only law firm breaks away • Kitces launches picker of 'best of breed' RIA software bundles • Vanguard targets 2070 just as media targets TDFs • SEC fishing for RegBI Scofflaws, including RIAs • CFP appoints first African-American chair

RIA Lawyers will reject RIA custodians• Kitces Nascar montage is now interactive and helpful • Vanguard's super long TDF draws critics• SEC supply lines are stretched with new battle front • Kamila Elliot is ex-DFA, diverse and calling CFP shots

January 12, 2022 at 3:13 AM

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Mentioned in this article:

Nexus Strategy
Consulting Firm
Top Executive: Timothy D. Welsh

Portfolio Management System
Top Executive: Andy Rachleff

Consulting Firm
Top Executive: Michael Kitces

Craig Iskowitz

Craig Iskowitz

April 25, 2018 — 2:12 PM
Setting aside the controversy about their fees and their new hedge fund owner, I believe Wealthfront's launch of Risk Parity funds is part of a bigger trend of B2C robo-advisors adding more complex investment products to differentiate themselves from Vanguard and Schwab. While Sokolin is correct that most clients don't understand what a Risk Parity Fund is, some do understand and are looking for alternatives to vanilla ETF portfolios. I expect more product announcements including UMAs, hedge funds and alternative investments to try and move upmarket and attract HNW clients.
Brian Murphy

Brian Murphy

April 25, 2018 — 5:17 PM
The whole Wealthfront risk-parity issue points to the structural problem of the industry to date - simply put, the costs outweigh the revenues. The current business model doesn't work. You'll see the same "issues" with any other proprietary products pushed through the pipeline. It's not the products themselves that are the point of contention but the economics of the underlying platform. Acquiring managed account customers, opening new accounts, moving money in and out of the platform, providing compliance on all those accounts isn't profitable at 0.25%. Wealthfront (and Betterment) have both gone about righting the ship by attempting to increase revenues. Betterment took the approach of selling 401(k) plans and adding personal advisors to the platform. Wealthfront's first salvo was higher margin, opt-out, proprietary products. The key to this industry is not in how to ramp the lifetime value of a customer from $500 to $1200 or more. The key is to rethink what you're trying to deliver in the first place and then build a platform to deliver that. First generation digital advisors think what the client wants is lower fees, an easy onboarding process for managed accounts and an intelligent approach to investing. Sure, they want all that, but they want more than that. There is a mis-match in what the target audience wants, and what is being delivered and that's why robo-advisor CAC is so high. First generation digital advisors aren't offering a product/service that is materially differentiated from what was already in place with the human advisors. Therefore they all fight for the same customers, increasing the CAC for all. There are deep lying assumptions in the industry that need to be challenged here...and today's robos have completely punted on thinking about them. The first being whether managed accounts are even the best approach to delivering next generation of advice. I would suggest not.

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