Is online advice about to catch on with 401(k) participants and investors, especially those about to retire? As waves of Baby Boomers begin to retire and roll assets out of DC plans, some online providers are betting that they will need and want advice and will be willing to pay for it. Do these services pose a threat to advisors?
The Wall Street Journal reports on new efforts by online advice providers Morningstar and Financial Engines targeting people who are set to retire but are unsure about how to create a stream of income. Schwab rolled out their index platform, which features advice from Guided Choice. And LPL is making a big push for its Financial Wellness program, which combines online tools and personal service from advisors. But investors have not flocked to these online services yet. According to EBRI’s Jack VanDerhei, investors are unwilling to pay the price — costs range from 20 to 90 BPs.
Meanwhile, venture capital firms are on a spending spree to fund these online aggregators and advice providers, with almost $300 million raised this year alone. Experts are calling it one of the hottest sectors for start-up investing.
Some are predicting that these services could do to advisors in the financial planning and guidance business what Schwab did to the brokerage industry almost 30 years ago. What do you think?
