Robo-Advisors

Stripped down to its essentials, financial advice is a fairly straightforward proposition. Done well, a highly ethical individual stewards the assets and actions of an investor in a personal and professional interchange. But now a vibrant new class of entrepreneurs is staking their fates and their fortunes on the premise that financial advice can be delivered in a better, cheaper, easier, more ethical, more transparent manner and, as a bonus, in a way more devoid of human annoyance on both ends of the transaction. Cue the robo-advisors, arguably a callous misnomer for automated asset management. The prototypical robo-advisory entrepreneur has more brands on his or her resume than NASCAR. The bona fides of these industry upstarts often include Ivy-level colleges and MBA programs at Harvard or Stanford. They are often flush with IPO dollars realized at concerns like LinkedIn, Facebook, eBay, Amazon and Microsoft. Robo-folk believe that technology is not an enabler of advice but rather, if engineered correctly, advice itself in digital form. And, they believe the best solutions originate in Silicon Valley or academia, not Wall Street. Robo-entrepreneurs are white-boarding the whole business model, culture and technology from scratch in the conviction that little can be learned from a legacy advice system still rooted in an investment banking culture acting under the core premise that if stockbrokers get rich some of the good effects will trickle down to clients – with the clients none the wiser. Robo-advisors are a scintillating topic for students of the advice game as they grow by hundreds of millions in assets every month, constantly evolve their business models and receive cash infusions from ever-larger swaths of venture capitals. Throw in the fact that robo-advisors have yet to see a dime in profits -- and won’t in the foreseeable future -- and you have real intrigue. RIABiz has avidly covered the fast-evolving robo-advice phenomenon and will continue to do so. We present the growing body of articles here.

Vanguard Group is a bricks, mortar and people company that just introduced a retail robo-advisor that lives on a server and may do a better job.

Ten months after it signaled it would, Vanguard Group unleashes its advice robot with analysts sure that 15 basis points and no-nonsense brand will net billions in no time

Almost out of its pilot stage, the Malvern, Pa.-based giant's 'Digital Advisor' shambles onto the robo scene almost a decade late but may catch Schwab and Betterment anyway with its pristine plainness, analysts predict

August 1, 2020 — 6:22 PM by By Lisa Shidler

Brooke's Note: The two biggest robo-advisors, Schwab's and Betterment's, are similar in that they came to market as mostly automated, then slowly, arguably grudgingly, added humans to the mix at a slightly higher price. Vanguard has gone the opposite direction -- and now we'll see ...

0 Comments
Iraklis Kourtidis [in front of his boat office]: I felt they scratched the surface of what you can do with engineering [related to tax alpha].

After the visions of this engineer and Wealthfront diverged in 2016, he left to write his own robo-investing code on a shoestring; now Riskalyze is his first customer

Iraklis Kourtidis takes Aaron Klein's 'Autopilot' product to another plane of efficiency with 'Rowboat,' software he largely wrote over four no-paycheck years

July 31, 2020 — 3:11 AM by Brooke Southall

Brooke's Note: Many of us have had a poem or book we felt we would like to write -- if only we had a big chunk of time to spend on it. Apparently, it happens to engineers, too, when they can see how software can ...

1 Comment
Jon Stein: Personalized portfolios with specific stocks for specific clients that still track an index -- that’s clearly where things are trending

With Schwab in Motif mode, Jon Stein tells Bloomberg Betterment's ETF view is shifting, talks 'revolution,' but declines through spokesman to confirm any imminent shift to direct indexing

The New York robo's CEO pulls no punches in a Q&A about the impersonal nature of exchange traded funds, but observers say Charles Schwab & Co. may have forced his hand toward an accelerated direct indexing timetable.

July 21, 2020 — 11:16 PM by Oisin Breen

Brooke's Note: It seems we are about to witness something fascinating, namely, how well Betterment -- biggest of the free-standing robos -- can do what startup companies generally don't have to do -- play catch-up on an established vision. In this case, that vision revolves around direct indexing, where ...

1 Comment
Friends for a decade, Runik Mehrotra and Samir Vasavada have raised $18 million in VC funds, largely on the promise that they can take on -- and beat -- current B2B robos like Betterment.

Sequoia Capital bet and won big on FutureAdvisor; now it's wagering $14.5 million on Vise and its 'extreme value proposition' for RIAs

The legendary VC sold FA to BlackRock for $150 million , cooled its heels, then re-upped in Robo 2.0 wave with TD, Schwab, Riskalyze and Jon Xu playing roles

July 6, 2020 — 7:16 PM by Oisin Breen

Brooke's Note: Recently I heard an incredible podcast (by Stephen Chen CEO of NewRetirement interviewing Eric Brewer and Ken Goldberg) about just how limited artificial intelligence is compared to human intelligence. The fact that Watson can beat Fischer in chess is a false indicator. A car, ...

2 Comments
Edward Jones will reverse engineer 14,000 branches into banks, if Utah cooperates.

Oisín's Bits: Wealthfront drops old mission statement, declares war on institutions and emphasizes banking future • Seeking Utah charter, Edward Jones may become largest bank in US by branch count • After Advent chief leaves, Black Diamond head steps up

Andy Rachleff cans the old 'democratizing' mission statement at his robo; The 14,200 one-man Ed Jones branches may become branch banks; Steve Leivent consolidates power at SS&C.

July 3, 2020 — 1:12 AM by Oisin Breen

After 12 years making 'democratization' of financial advice its mission, Wealthfront is now all about dismantling "institutions" by becoming much more of a bank, albeit one that acts less institutionally.

0 Comments
Wealthfront CEO Andy Rachleff oversaw the insertion of leverage, hence risk into portfolios, which has been unrewarding in this market.

Amid pandemic, Wealthfront's risk parity fund faces rough stretch, reviving questions about the wisdom of a 'millennial' robo using something as 'Wall Street' as leverage and active management

The $20-billion Redwood City, Calif. firm walks fine line between being anti-Wall Street and dabbling in leveraged active investments that COVID-19 markets have hit hard.

April 30, 2020 — 9:57 PM by Oisin Breen

Critics are again calling out Wealthfront for including a risk parity fund in its asset allocations for a subset of robo-investors. That portfolio of $1-billion-plus fell 43% in 25 days from Feb. 21 to Mar.18 in the sharp COVID-19 market selloff.

1 Comment
Paula DeLaurentis: We understand it's different so we communicate, communicate, communicate.

After much acclaim but not enough profits, Motif shutters and sells itself off for parts with Folio buying the RIA and retail accounts

The $850 million stock-basket company in San Mateo, Calif. had success but -- $126 million invested by Goldman Sachs, Renren and Sallie Krawcheck and others -- not enough to justify business as usual

April 22, 2020 — 6:52 PM by Brooke Southall

Brooke's Note: If you look back at the very in-depth article about Motif that Kelly O'Mara wrote for RIABiz in 2013, many warning signs were there. A few advisors that Motif referred us to liked their thematic investing robo very much. But our experts expressed bafflement. “What’s wrong ...

4 Comments
Tobin McDaniel: More than half of our existing digital advice clients are over the age of 50.

Schwab set to launch 'shoe-that-dropped' subscription retirement income robot that acts like a virtual annuity and produces 'predictable' paycheck

With ex-Nationwide exec in lead, Schwab Intelligent Income helps 'unsolved conundrum' creep closer to a solution -- but no guarantees on income

December 20, 2019 — 2:25 AM by Brooke Southall

Brooke's Note: In researching this article, Lex Sokolin brought out an obvious point that gets lost in the cognitive dissonance of client segmentation: Baby boomers are not all rich. In fact, millions of boomers poorly prepared for retirement -- as the Senate just addressed -- and they ...

0 Comments
Drew Sievers:  I don’t kiss and tell. ​

Drew Sievers woos fresh $12 million in capital and a fat $15-million loan to renamed Trizic

Now named 'Harvest,' the CEO of the robo-for-banks won't kiss or tell -- except about those 18 banks signing on in 18 months.

December 13, 2019 — 7:52 AM by Oisin Breen

Brooke's Note: If a spoof of The Graduate were to run in 2019 at an RIA conference, the knowing dad would whisper in the robo-advisor founder's ears: "banks." The retail robo-advisors have spent the last nine months rushing to realize their destiny as banks. See: After ...

0 Comments
Porter Gale: We just have to be smarter and more creative.

Personal Capital keeps hiring move-the-needle executives, but the growth rate -- enviable to many -- is still pretty flat, if an IPO is in its future

The Redwood City, Calif. virtual RIA hired its third ‘growth executive’ to stoke demand

December 11, 2019 — 5:26 PM by Oisin Breen

Brooke's Note: Of all the startups out of the Great Recession of 2009, Personal Capital is still topping the list of success stories. It wasn't easily foreseen. The two areas where companies are disrupting norms is with technology and fees -- much more automation and far ...

4 Comments
Andy Rachleff: 'We realized [a high-yield checking account] is a better entry point than an investment account.

After Andy Rachleff explains Wealthfront's corrective to banking, Jon Stein told how Betterment is investing heavily in banking but mindful of 'frothiness'

The Redwood City, Calif.-based robo-advisor co-founder explained the banking pain points at InVest West and the New York-based robo co-founder told of a $1B banking week but exulted more about RIA custody

December 6, 2019 — 11:48 PM by Brooke Southall

Brooke's Note: In 2019, the heads of the two top independent robo-advisors -- Jon Stein and Andy Rachleff -- remain two of the better "gets" for a conference and somehow InvestWest managed to get both of them -- albeit not on stage at the same ...

2 Comments
Sallie Krawcheck: It's easier to divorce your spouse than it is to get rid of an investor.

Why Sallie Krawcheck made a plea for 'divorce' from unnamed 'investors' as her Ellevest startup approaches its sixth birthday

The robo-advisor still has AUM of just $400 million; Now investors need new patience as the co-founder pivots toward higher net-worth women willing to pay higher fees.

December 2, 2019 — 5:26 AM by Oisin Breen

Brooke's Note: We talk about all the reasons mom-and-pop RIAs keep beating the venture-backed RIA startups as handily as banks, corporate advisors and wirehouses. One reason that doesn't make the usual list is that classic RIAs are almost universally self-funded -- hence organic by nature. That ...

7 Comments
Ed Mercier: Purchasing the broker-dealer from Edelman helps ensure that we can continue to work with our RIA partners without subscriptions or contracts.

How Edelman Financial Engines spin-off deal became a RetireOne engine that's heating up the RIA annuity game again

The fee-based annuities marketplace of Aria Retirement Solutions adds Edelman's broker-dealer, 6,000 clients, 'hundreds of millions' in client assets and an old hand

November 20, 2019 — 10:19 PM by Oisin Breen

Brooke's Note: Nobody can dispute the beauty of guaranteed income. But in financial advice, such a thing takes the form of an annuity and often turns out to be too good to be true. Or at least the product often is way too expensive, too unwieldy and ...

0 Comments
Andy Rachleff is staying the course on a minimum viable product philosophy that has benefits -- and embarrassments.

Wealthfront is again forced to disclose a bad mistake --testing how far the move-fast, break-things -then-apologize culture can go

The Redwood City robo issues erroneous 1099 data in 2017 that it just discovered. It happened around the time it dumped Apex.

October 19, 2019 — 4:13 AM by Oisin Breen

Brooke's Note: In reading the booked "Zucked" about Facebook's rise -- and then giant embarrassment at being used by Russia to interfere with our national election -- there is much talk about CEO Mark Zuckerberg's adherence to the move-fast, break-stuff modus operandi. It no doubt helped ...

2 Comments
Rob Foregger: Moving beyond the target date fund ... that’s the vision ... they're now antiquated.

New class of robos lay siege to 'antiquated' target-date-funds (TDF) market; even defender of the 401(k) citadel, Vanguard, sees handwriting on the wall

Fidelity, Ascensus, and Morningstar are all making 401(k) moves that could see automated advice replace the Vanguard-dominated TDF market but maybe Vanguard just woke up in time to cannibalize the market itself.

October 8, 2019 — 3:02 AM by Oisin Breen

Brooke's Note: Nobody, it seems, can rival Vanguard Group in the target date fund (TDF) category. It owns the $2 trillion market. But the introduction -- by Vanguard itself -- of a robo-advisor that could do more than the set-and-forget funds for less money spent in fees ...

6 Comments