As industry hype around the perceived threat of robo-advisors continues, a new report says that wealth management firms are in fact responding to what has been described as the "innovator’s dilemma."

While some industry players have expressed concern over the potential for “eRIAs” or “robo-advisors” to dilute the value of in-person financial advice, a recent report suggests that existing direct firms are embracing the competitive pressure.

“The eRIA or robo-advisor business model presents the opportunity to bring technological upgrades to an industry hampered by legacy systems,” said Frederick Pickering, a research analyst at Cerulli Associates.

“During the past few months, significant developments from existing direct firms have dramatically changed the eRIA conversation,” Pickering said about findings released this month from The Cerulli Edge: US Edition - February 2015.

“While the low-cost business model pioneered by these firms may stick around, it is unlikely that the eRIAs will be able to compete with the low-cost offerings of the direct firms,” he added, noting that imitation is a serious threat to their continued existence. “These firms have rolled out innovative ideas, but the existing financial services industry has ample resources available to replicate the robo-advisor business model.”

Many robo-advisors previously operated on the assumption that financial firms were unwilling to duplicate their model in case they upend revenue - but they are in fact responding by building their own "eRIA-inspired" services, Pickering continued.

Last month, for example, Charles Schwab launched what it described as a fully automated investment advisory service, Schwab Intelligent Portfolios. The new offering uses computer algorithms to build, monitor and rebalance diversified portfolios based on an investor’s stated goals, time horizon and risk tolerance – without charging any advisory fees, commissions or account services fees, Schwab said.

Whereas the market development in 2014 was dominated by the launch and growth of start-ups, established wealth management providers have started to strike back and are opening up to the robo-trend themselves, according a report by the Swiss research company MyPrivateBanking Research last month, entitled Robo-Advisors 2.0: How Automated Investing is Infiltrating the Wealth Management Industry.

“We see a growing awareness on the part of conventional wealth managers of the need to respond to the challenge that robo-advisors present,” Francis Groves, senior analyst at MyPrivateBanking, said at the time. “A number of important and influential players in the financial services industry begin to engage with the kinds of technology that were seen as the identifying characteristic of robo-advisors exclusively less than a year ago. And this is just the beginning of a significant trend for the next few years,” Groves added.

In a press release about its report, Cerulli said some eRIAs may have to re-think their business models to become technology providers to advisors given increased fee compression and expanded services from the direct space.

“The larger direct firms may replace eRIAs in the automated investment space, but the presence of eRIAs will have changed the advisory industry for the better,” the Boston, MA-based firm said. “By emphasizing low cost and sleek technology, they have forced existing firms to take technology offerings seriously.”