We are of two minds on the whole robo-advisor movement. First, the genie is out of the bottle, so get on board, folks. BUT – if you can’t put it together so that it can revenue-produce, then you’d better figure out a new model. We know that many new robos are simply not going to make it. They may have billions in AUM, but are losing their shirts because their fees are too compressed and can’t cover their overhead. That doesn’t go on forever. Been there, done that when the internet bubble burst.
We have already witnessed this phenomenon in publishing when the web took over print. Publishers were forced (kicking & screaming) to give in to market forces, but found other more lucrative ways to continue to make money. Ultimately, this is what the wealth management sector will have to do as well. The robo-advisor technology movement is well underway and will continue to evolve.
Financial firms who sit back and let it pass by without figuring out a path to profitability will lose out in the end, in our opinion.
“RBC Wealth Management says it wants to switch its robo plans from “go” to “wait and see.”
“The FutureAdvisor project [with BlackRock] is on hold so that we may address other priorities, specifically, DOL fiduciary standard-related work,” the firm said in a statement on Wednesday.
But as news about RBC’s move spreads across the industry, at least one consultant is asking which firm will be next to change its approach. (The RBC development was first reported by Financial Planning.)
“Stay tuned for more on the strategically canceled” or put-on-hold robos, said Tim Welsh, head of Nexus Strategy, in an interview. The consultant expects plenty more robo plans to go “back to the drawing board.”
Raymond James Unveils Robo-Advisor
The firm says its more than 7,100 indie and employee reps will have access to the innovations by year-end.
“Absolutely, this will happen as more get rolled out [or near rollout]. We’ll see some in the first year that will show results that are not what firms had planned or expected. Dozens of firms went into this with a herd mentality vs. a clear strategy.”
Many broker-dealers felt they needed to add a robo channel “right away like everyone else,” Welsh says. “But it’s really a strategic question: Why do you think you need to do it? Why do you really have to do it, and what are the strategic factors driving it?”…