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Checking in with Robos

In September, financial consumer focused data firm, Hearts and Wallets, released survey results indicating that some 8% of U.S. households have invested money with robo-advisers.

While this is still a relatively small share, the penetration among millennials was significantly higher. According to the survey, nearly 20% of mass affluent millennials with investable assets between $50,000 and $500,000 are using a robo-adviser. Perhaps even more surprising is that nearly half of wealthy millennials with more than $500,000 to invest have chosen robos.

For many of these younger investors, robo-advisers may be a steppingstone to a full service advisory relationship once the complexity of the household finances warrants more sophisticated and tailored advice. However, several firms with robo platforms have begun to add new applications providing enhanced financial management and planning tools. These tools are provided for free and are typically easy to use and integrate into a client’s normal financial management practice. Among these are Fidelity’s SpireSchwab’s Schwab Plan and BOA’s Life Plan.    

It appears that robo-advisers are committed to adding functionality that provides a wider breadth of services and encourages users to deepen their “relationship” with the firm. It will be interesting to track the development of these new technologies to see if they can reach a level of sophistication sufficient to satisfy the needs of high-net-worth investors. If so, we anticipate that advisors and platforms serving this segment will begin to add “robo” to their arsenal of tools and applications.