The US Robo-Advisor “War” Is Over
“Who won?
The product platforms.
”
We had some head fakes by the custodians (which attracted the most vitriol), but the reality is that Vanguard, Blackrock, and Schwab, as product platforms, won.
And it makes total sense. The product platforms have every incentive for the robo channel to work. As long as it results in their products being sold.
“Where does that leave the remainder?”
For those robos wedded to products, they have effectively become VaRs for the product platforms. It’s a tough realization, but that’s reality.
Does Vanguard care that Wealthfront exists? Vanguard is ambivalent. Wealthfront feeds them, as does Betterment, and other robos.
Vanguard can wait, be a robo-advocate, and continue to be fed AUM from the VC capital feeding the burn rates at the robo-advisor firms.
What will the consumer do if the robo-advisor goes away? Nothing. If they used Vanguard/Blackrock both firms have robust transition teams to lateral the customer to their own robo-platform.
So Vanguard, Schwab, and Blackrock just have to wait. And, ironically, continue to be fed AUM by their “competition”.
“The remaining play? An active product platform becomes a robo-advisor.
But that would contradict a large part of the value proposition of low fees.”
I am personally curious what Dimensional Fund Advisors chooses to do now.
For the independent RIAs? That profession seems to be becoming a utility. I would expect M&A to step up as smart money leaves. Sadly, its very reminiscent of the dental industry and healthcare in general. Rolling back into a large firm will be the norm.
Selling now is a very rational decision for some firms.
“Would you want to be on the other side of these product behemoths in gathering new assets or competing for the consumer?”
I think not.
But I have my fingers crossed the robo-advisors survive to January 2016. Those SuperBowl ads would be great!
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