Technology
More Firms Foray Into The Industry's Growing World Of Robo-Advising

The concept of robo-advising is gaining momentum in the financial advisory arena, having an inevitable knock-on effect on the wealth sector.
The term “robo advisor” seems to have become well and truly cemented in the wealth management dictionary.
The Swiss firm MyPrivateBanking recently looked at how web-based wealth management providers offering automated investment services will become an increasingly important part of the industry (although still a small minority in the near- and medium-term.)
The consensus, however, seems to be that robo-advising is growing in the financial advisory arena, and it's having an inevitable knock-on effect on the wealth sector.
While there are strong arguments both for and against robo-advising, it ultimately boils down to the client and what is right for them. For example, as technology continues to permeate our everyday lives, robo-advising can benefit certain investors by providing more choice across the financial services marketplace, Matt Wilson of Scottrade Advisor Services recently said.
A number of firms in the sector - at the mass affluent level ultra high net worth end - have recognized the benefit that at least having an online offering of automated wealth management services can bring. Meanwhile, some players have cropped up providing just that - WealthFront, Personal Capital and Betterment, for example.
Yesterday, a big name in the financial services arena - Schwab - said it plans to make its new automated investment advisory service – Schwab Intelligent Portfolios – available to retail investors in the first quarter of 2015, with a white label version for RIAs available shortly thereafter.
With $5,000, investors will be able to open individual, joint, IRA and revocable living trust accounts that offer technology-driven automated portfolios and a “modern, streamlined client experience designed for ease and efficiency.”
“While Schwab Intelligent Portfolios will be very accessible with a low account minimum, the combination of a simplified client experience with highly sophisticated portfolio construction, makes it appropriate for a wide range of investors – from those who are just getting started to those who have accumulated more wealth, but prefer a technology powered approach to investing,” said Schwab's president and chief executive, Walt Bettinger.
A customizable version for RIAs will be available shortly after the launch, through which advisors will be able to apply their own branding to web and mobile apps, for example. Pricing options will be available for these versions including an option with no platform or program management fee.
Meanwhile, Orion Advisor Services and Riskalyze together rolled out Orion Discover and Riskalyze Autopilot, designed to give advisors a “competitive advantage” over online-only investing platforms and robo-advisor services.
“It seems a new robo-advisor starts up each week...” said Eric Clarke, chief executive and president of Orion. “Discover and Autopilot break down the barrier for traditional advisors to have a quality online prospect and new account experience, without the need to compromise on the value they provide to clients, or take a massive robo-advisor pay cut.”
“Online-only investing services have their place in the world, but independent advisors have a strong value proposition when they combine world-class technology with personal relationship and access for their clients,” added Aaron Klein, CEO at Riskalyze.
Orion Advisor Services is a portfolio accounting service provider to some 500 advisory firms (representing 780,000 individual accounts), with around $165 billion in assets under administration.
Riskalyze works with advisors, independent broker-dealers, large RIAs, custodians, clearing firms and asset managers to quantitatively measure client risk tolerance and use that data to “quantify suitability” when it comes to investing.
The firms' two new products can be used independently of one another, the firm told Family Wealth Report, but together they “give advisors the ability to qualify a client, provide a proposal and then open the account.”
Global assets under management of robo-advisor services are projected to reach $14 billion by the end of this year, with 83 per cent of this money run by US-based firms. By the end of this decade, such advisors will run $255 billion of client money, according to the above-mentioned report by MyPrivateBanking Research.
“The robo phenomenon is here to stay and we believe there is good reason to expect robo-advisors to be highly successful as a class,” said Francis Groves, senior analyst at MyPrivateBanking, in the firm's latest research on the topic. “The opportunities and the dangers presented by robo-advisors to conventional wealth managers can be summed up in one single word, 'technology.'”