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 That strikes fear into the hearts of many financial advisers who
typically charge 1 percent or more of assets under management to
offer personalized advice to investors.
Some, such as Ritholtz Wealth Management, are responding in kind.
Earlier this month the firm launched Liftoff, a digital portfolio
management tool aimed at young would-be clients with under $100,000
to invest who want account oversight but don't need complete wealth
management. The new offering aims to give investors easy and
inexpensive (0.4 percent of assets per year) access to the firm's
investing strategies and to keep those clients in the fold as their
wealth grows, said CEO Josh Brown.
Upside, the San Francisco-based startup that provides the technology
behind Liftoff, is also working with other registered investment
advisers to offer a way to compete with the direct-to-consumer
“robo” offerings from such firms as Betterment LLC and Wealthfront
Inc, which offer consumers digital-only access to low-cost ETFs and
automatic portfolio design and rebalancing through algorithms.
On Monday, Charles Schwab announced it was moving into the automated
advice space with a free product.
Fidelity said on Oct. 15 that it would refer its advisers who wanted
a low-cost automated investment offering to Betterment LLC, one of
the largest of the new robo-advisers.
STILL A SMALL SPACE
Advisers who fear their business will be undercut by products like
these should remember that the current competitive threat is tiny,
accounting for less than $5 billion in assets, said Sophie Schmitt,
senior analyst at Aite Group, a research firm. So, panic isn't
necessary, though it's probably a good time to make some moves.
“The traditional financial services world is waking up to the
reality that clients want to consume financial information digitally
and 2014 is a pivotal year," Schmitt said.
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Advisers can start to compete with these automated products by
offering clients online access and beefing up the technology tools
they use themselves when working with clients, she said.
One case in point is Merrill Clear, launched earlier this year by
Bank of America's Merrill Lynch, which allows advisers to help
clients plan for retirement, and prioritize goals on iPads.
Flesh-and-blood advisers who use digital tools have an advantage
over algorithms because they can "marry technology and human
behavior," said Daniel Satchkov, president of Rixtrema, a firm that
offers software advisers can use to demonstrate portfolio risk to
clients.
Brian Eddy, a Beverly, Massachusetts, adviser, said he agrees. His
firm, PortfolioFix, offers online access to their accounts and
automated portfolio rebalancing. But he also talks to them in
person, on the phone and via Skype, the teleconferencing program.
“There’s always going to be a market for someone who’s available to
the client on a one-on-one basis,” he said.
(Editing by Linda Stern and Andrew Hay)
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