Tadas Viskanta at Abnormal Returns posted an interesting piece on the rise of robo-advisors: Peak Robo-Advisor? Tadas asked his fellow financial bloggers to chime in on the robo revolution, and I shared my thoughts below:
Q: Venture capital has likely dried up for stand-alone robo-advisors. If so, where does the business of rob-advising go? Or said another way is robo-advising simply going to be the way advisors manage client accounts going forward?
A: I really see the robos getting atomized into smaller and smaller operations. We’re nearly to the point where every advisor can offer their own robo. In fact, I’ve been working with Wes Gray and his team at Alpha Architect to do exactly that.
This is a big deal because the biggest impediment to an advisor growing their practice is time. Your instinct is to try and serve every client that knocks on your door. But the reality is, you can’t. Your time is simply too valuable to do a lot of sit-down meetings with clients that have only modest sums to invest. Time has a monetary value, and you actually lose money on smaller clients. You have the same amount of regulatory compliance headache with a $10,000 client as a $10,000,000 client. Arguably, you actually have more.
But a robo setup changes that. With a robo setup, you can still profitably serve smaller clients, get them the same portfolios you would give a high roller, and all the while keep the regulators happy. A robo setup also allows a larger client to “kick the tires” and try out your services before committing a larger portion of their net worth to your management.
You can read the rest of the answers here.
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