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.

Mike Kerins: Going it alone as a VC-backed firm scared me as I didn't have that part of the vision.

As Principal takes RobustWealth reins, the looming question is whether it follows the Northwestern-LearnVest script, which had a depressing final scene

The disparity in size, culture, locale and tenure between the $1 billion AUA robo and the $673 billion financial titan, makes the marriage an interesting case study

September 6, 2018 — 7:55 PM UTC by Oisin Breen

Brooke's Note: In hypothetical classifieds where robo-advisors might advertise themselves to the giant banks and insurers, the typical advertisement might read: One robo-advisor for sale with young, talented workforce, two years of completed engineering, half a value proposition and limitless possibilities with the $75 million of capital to ...

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Jacqueline Ko Matthews: We uncommoditize the robo and that's why some of the biggest firms in the country want to invest in us … advisors need what we're doing.

Marty Bicknell-led Shark Tank-style contest chooses to back super-ambitious RIA-automation startup, but his $25-billion RIA'll keep Orion for now

ScratchWorks picked Jacqueline Ko Matthews' InvestmentPod to improve advisor productivity by 60% but it's still just 'potential,' says Bicknell; Good potential

August 1, 2018 — 5:17 PM UTC by Oisin Breen

Brooke's Note: Classic RIABiz articles were about the fragmenting of Wall Street into small RIA firms and the revolution from desktop software to online technology. Today, more emphasis gets placed on new and creative ways of consolidating RIAs and moving beyond conventional online software ...

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Neesha Hathi says Schwab micro-arranged how its engineers work.

Wild role swaps at InVest 2018 as Schwab recasts its engineers into micro teams and Acorns founder talks macro corporate partnerships

The giants like Fidelity, BlackRock and Envestnet come to get down with the innovators and the startups strut like giants

July 17, 2018 — 10:23 PM UTC by Graham Thomas

Brooke's Note: The waitress is practicing politics as the businessman slowly gets... You know the rest. In RIA land, the corporations are playing small ball and the digital dudes are trying to play grown-up. We get it. It  should be healthy. But after years ...

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Donna Wells: I consider myself a hacker, even, if not an engineer.

Betterment turns to ex Mint and Schwab marketing exec Donna Wells to 'hack' back copycat robos and make its brand a household name

No longer the disruptive New York upstart, the $14 billion AUM robo is outgunned by institutional heavy-hitters -- a dynamic Donna Wells knows

July 12, 2018 — 6:12 PM UTC by Oisin Breen

Brooke's Note: The robo naysayers have long made one very boring point about the very exciting prospect of creating from scratch a better, cheaper, fairer and more inclusive financial advice business. Namely, the analysts have pointed to the immutable client acquisition costs they see ...

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Jay Shah: One of the first things I did as CEO was introduce a tiered service model … Our average initial client investment has grown 37% since last year, and our average client has more than $400k in a personalized portfolio.

Taking the helm from famous founder, Jay Shah gets Personal Capital out of Vanguard's shadow with new shape, new deals and a 70% leap in assets

Still $93 billion-plus in arrears to Vanguard's $100 billion RIA, the new virtual-RIA CEO is making strides in the kinds of startup details that a venture capitalist can love

July 6, 2018 — 8:20 PM UTC by Oisin Breen

Brooke's Note: I was always a Personal Capital doubter because of what I saw as two potential red flags. It seemed to have an all-of-the-above strategy that included elements of classic RIAs, robo-advisors and Ken Fisher. See: James Surowiecki has lessons for RIAs about ...

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Joe Ziemer: We take this stuff insanely seriously.

A year after Acorns gets outed, Betterment faces its juvenile past with 2018 FINRA settlement over 2014 infraction

The $14B robo's ADV will remain clean but it'll live -- like Acorns before it -- with a BrokerCheck violation based on how it managed cash when it was a $608-million firm with a smaller compliance staff

June 22, 2018 — 8:17 PM UTC by Brooke Southall

Brooke's Note: Not only is Betterment the biggest free-standing retail robo in terms of assets and revenues, but arguably, it has the best brand. Wealthfront, SigFig, Trizic, Jemstep, Upside etc. seem not to suggest a value or values proposition. Betterment speaks with a touch of ...

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Mike Sha raised a pile of money that'll come in handy to pay for people and more people.

'Capacity constrained' SigFig suddenly raises unsought $50 million after major VC steps forward

General Atlantic's funding largess comes after $67 million carried the San Francisco robo its first 11 years

June 19, 2018 — 12:41 PM UTC by Brooke Southall

Brooke's Note: Your eyes aren't playing tricks. We just published a fairly in-depth article about UBS going live with SigFig last week. Mike Sha's robo-advisor faced tough choices until two wirehouses offered unique partnerships -- and maybe a new business model to boot ...

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Mike Sha: It's way better for our clients if technology investments are amortized across  [multiple] large partners as opposed to one-off custom development for any one-off particular partner.

Mike Sha's robo-advisor faced tough choices until two wirehouses offered unique partnerships -- and maybe a new business model to boot

Sure, the SigFig's founder plays by some of UBS's rules in taking its financial backing and giant systems account but beyond that, the freedom to cavort with Wall Street rivals is pretty unlimited.

June 14, 2018 — 3:46 PM UTC by Oisin Breen

Brooke's Note: When I asked people who attended Pershing INSITE 2018 what was said about robo-advisors, they recalled not a word being spoken. Yet just three years ago it was all the buzz at every RIA conference. Back then the robos had few assets or ...

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Rob Goldstein: Acorns is a pioneer in creating innovative ways to engage investors in a mobile-first world.

Mindful of 'Snapchat' dynamic, BlackRock takes big Acorns stake after the micro-robo wins 2.2 million investors in 12 months

The $6.3-trillion asset manager led the $50-million round to ensure a foothold at LA-based firm with an app that onboards 6,000 investors daily

May 24, 2018 — 3:28 AM UTC by Lisa Shidler

Brooke's Note: There are a series of staggering numbers in this article starting with the Acorns won 2.2-million new accounts since last we wrote about the startup a year ago. See: As Acorns grapples with monetizing 1.1 million micro-accounts, the laid-back LA robo-advisor ...

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Aaron Schumm: [We want] to work with advisors versus displacing them.

Vestwell makes hard-charging payroll startup, Namely, its portal to win plan sponsors for RIAs and IBD reps it services

CEO Aaron Schumm is helping advisors get the benefit of feet already wedged in doors thanks to pervasive payroll service apps

May 22, 2018 — 8:13 PM UTC by Oisin Breen

Brooke's Note: It's never enough to invent software. You also have to make it fit into the business world and win accounts for its users that pay the freight. Aaron Schumm knows that in spades, which is why his Vestwell startup keeps making news ...

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Alexa von Tobel will keep her title with the relaunch of LearnVest but her idealistic mission may or may not survive.

Why exactly Northwestern Mutual bought a digital darling for $250 million, shut it down, orphaned its customers and declared progress

When the Milwaukee-based mega-insurer relaunches in six months, the one aspect certainly subtracted from the mix will be the cash-draining 8,000 mass market customers

May 9, 2018 — 9:23 PM UTC by By Lisa Shidler

Brooke's Note: If there were a handbook of M&A ethics, the chapter on legacy behemoths buying digital-era startups promising to democratize financial advice would read: "Dark, old-line product manufacturers are permitted to buy small, promising, disruptive, cash-burning beacons of entrepreneurial light and re-educate the ...

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Ric Edelman: It's all additive.

Ric Edelman's RIA empire to merge with legacy The Mutual Fund Stores in $3-billion deal that takes Financial Engines private

Hellman & Friedman stake the eye-popping sum in cash to outright own an RIA with nearly $195 billion of AUM including robo-advised 401(k) assets

April 30, 2018 — 11:57 PM UTC by Brooke Southall

Brooke's Note: Yes, wow. Three ventures I have followed for more than a decade -- Edelman Financial, The Mutual Fund Store and Financial Engines -- are now one RIA in a very Wall Street-style valuation that takes into account how the whole is expected to be ...

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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.

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

April 25, 2018 — 12:03 AM UTC by Lisa Shidler

Brooke's Note: If you can start up a business without investors, do it. Being an entrepreneur is supposed to be fun but it's hardly guaranteed. The fun of being your own boss dissipates if you answer to the impatient people who own you -- especially ...

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Tom Bradley: I have the opportunity to share in the growth of Max and that's what I'm interested in.

What Tom Bradley's first post-TD Ameritrade gig says about him is interesting and his specific MaxMyInterest robo mission, more so

The non-competed New Jersey exec gets a piece of the action and much boils down to signing a wirehouse, an RIA custodian or an LPL

April 9, 2018 — 5:32 PM UTC by Oisin Breen

Brooke's Note: Were Frank to fire me or were RIABiz to get bought out by the Chinese, my sincerest hope is that some very tough lawyer would make me sign a non-compete agreement -- highly binding -- that took me out of the game for two ...

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Cara Reisman: We want to meet as many needs as possible while still being easy to use.

Betterment reboots its RIA business big-time with new chief, ACATS for ETFs and the ability to fold existing holdings into robo portfolios

Cara Reisman absorbs duties of Tom Kimberley -- then gets to work making the New York robo-custodian more like classic RIA custodians

March 29, 2018 — 12:06 AM UTC by Brooke Southall

Brooke's Note: This was a hard article to write because its topic was one small step for trading and a giant leap for RIAs and Betterment. Luckily I got Betterment's new RIA chief on the line to get the technical story but also ...

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