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Mega-RIA Investing in Online Advice

With $18 billion in AUM and robust existing infrastructure including personnel, expertise and technology, Edelman Financial Services’ “Edelman Online” service has a leg up on the competition in the crowded online advice marketplace. “The technology has evolved to the point where we can effectively deliver our investment management services electronically for those who don’t feel the need for broader financial planning advice or who don’t want to talk to an advisor but want the services that we provide,” Ric Edelman told RIABiz in a recent interview.

Another key: access to an advisor. “Even though people who use Edelman Online don’t have to talk to an advisor, most of them, we have found, prefer to do so at some point. So our advisors remain available to our online clients just as all our other clients have,” Edelman notes.

Edelman sees the value added by advisors as a key differentiator in a niche that includes Betterment (which is currently beta testing an advisor component), Wealthfront, LearnVest and others. “I don’t believe that online-only services have a sustainable business model. Based on published data, it does not appear that they are generating sufficient revenues to support their infrastructure,” Edelman says. “It is also becoming increasingly apparent that their own customers want interaction with advisors, which is not something that their business models were originally contemplating” or that their pricing structure can support. This means one of two things: “Either they will die, or more likely, they will alter their business model to one that is more sustainable.”

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