With Schwab’s recent announcement of a no-fee, ETF-based robo-advisor of their own, the race is on among a horde of robo-advisors, some very well-funded, and the “old guard” of online brokerage services.
While Fidelity is partnering with Betterment, Schwab is distinguishing their offering because they custody the assets. TD has an open architecture approach to robos. Due out in the first quarter of 2015, with an RIA version set to follow soon thereafter, Schwab’s move validates the robo-advisor model as much as it threatens it.
Wealthfront countered the Schwab announcement by pointing out that free is not always what it seems, with many of the underlying investments providing revenue sharing to Schwab. With $100 million in the bank and a $700 million valuation, Wealthfront distinguishes itself with its focus on Millennials, claiming that the old guard is more apt to serve Baby Boomers.
Are robo-advisors, in whatever form they take or platform on which they are available, a threat to traditional advisors? As Michael Kitces often points out, if a robo-advisor provides what an advisor offers, then the advisor should be threatened. On the other hand, advisors which offer more will use robo-advisors to accelerate and augment their services.
