Robo advisors are becoming commonplace thanks to their considerably cheaper offerings than those provided by human wealth managers. The transparent fee and no-conflict-of-interest structure is appealing to a new generation of investors (over 60% of robo advisor clients are under 35). As a result, robo advisors are doubling their AUM every few months, but the $20b currently under management is still tiny compared to the $17t managed by human advisors.
Schwab’s arrival was discreetly celebrated as a validation of the automated advisory model. A truce of sorts seems to be in the offing. Betterment now offers a “white-label” version of its platform, so that human wealth advisers can pass off the computers’ diligence as their own. Fidelity, a giant financial-services firm, is among those trialling the service. Human-based advisory services point out they have lots of clever computer wizards working for them. Robo-advisers, for their part, boast about the pioneering investment thinkers they employ, programming the computers to recommend the right products.