Robo-Advisors vs Traditional Advisors: A Battle for the Hearts and Minds of Investors

The financial technology (FinTech) sector has suddenly become all the rage within the news media and for investors. No segment of FinTech has benefited more from this increased interest than automated investment advisors.  More commonly known as robo-advisors, they are among the hottest new players in the FinTech landscape, successfully capitalizing on the advent of social media, smartphones and tablets to provide cutting-edge investment management advice to tech savvy investors. Seizing upon a confluence of regulatory change, coupled with the democratization of technology, and a shift in consumer behavior, their algorithm-driven online platforms combine a state-of-the art user experience with low fees, transparency and low minimum levels of investment. This has allowed them to model their businesses around the underserved Generation Y (aka Millennials) investor community.

Recently, robo-advisors have also drawn the attention of affluent Generation X and Baby Boomer segments, due to their growing interest in using enhanced technology to monitor and automate their portfolios. Their emergence is part of a trend that threatens to divert trillions in revenue away from traditional financial services firms. By offering technology-enhanced financial products, their non-traditional business model is seen by many as a disruptive force to the otherwise sedate wealth management industry.

But beware, all that glitters is not gold and the Robo-Advisors face some stiff competition when it comes to capturing the hearts and minds of investors.  In the biblical story of David vs Goliath, we all know the outcome; however, todays’ capital markets are not the battlefields of old.  Traditional investment advisory services have a significant advantage when it comes to marshalling resources and defending their ‘space’. While Robo-advisors may be all the rage when it comes to venture capitalists and media coverage; they do not hold the ‘high ground’ and their battle for supremacy is a difficult one. 

While the robo-advisor community may be disrupting the landscape, large market forces are at play, and more traditional players have taken note.  Acquisitions and innovation go hand in hand and the future is not yet written for the ‘robos’; as can be evidenced by recent events.

This 18 Page TABB Group note, Robo-Advisors vs Traditional Advisors – A Battle for the Hearts and Minds of Investors, discusses the deeper issues and challenges facing the robo-advisory industry, and the latest trends. Furthermore, the note also describes in detail the disruptive nature of the robo-advisor revolution and its’ limitations. TABB Group highlights the initiatives of a number of the larger and smaller wealth management firms, robo-advisors and bionics, including Asset Builder, Betterment, Blooom, FutureAdvisor, Guided Choice, Hedgeable, Index Fund Advisor, Jemstep, Liftoff, Personal Capital, RebalanceIRA, Schwab Intelligent Portfolios, SigFig, Vanguard, WealthFront and WiseBanyan.  We examine the relative values and AUM of all the major players and look at how the updates are disrupting the marketplace and changing the way we look at investment advisory services.