Spring has brought lots of action even in the commoditized robo-advisory segment.
Three picks capture the flavor of the day in US robo-advisory.
- Ellevest, the B2C standalone robo focused on women, raised $33million from a select group of investors.
- Betterment, the hybrid standalone robo, drops account minimum for customized portfolios for retail clients too.
- Charles Schwab adds a subscription-based financial planning offering (Not one size fits all).
Ellevest is in its 4th year and remains focused on empowering women. The offering includes a significant educational and coaching service for business women. What became clear from this recent funding round, is that the only viable part of the business is actually the HNW part. Ellevest Private Wealth Management is the premium service targeting HNW females and most of the capital raised will go into growing this business. This makes me believe that Ellevest doesn’t actually belong to the robo-advisory category but to the `Financial Wellness for Women in Business` category.
Betterment, on the other hand, has gone hybrid in two ways. Both in terms of offering a 100% DIY asset allocation service and with an advisor lite possibility; and having a B2C business parallel to a B2B business for financial advisors and for corporates (e.g. Uber). Financial advisors using the Betterment platform didn’t have an account minimum anyway. Now Betterment drops the 100k account minimum for individuals that want a customized portfolio allocation through the Betterment Flexible Portfolios offering. Their Premium service for 40bps now has no minimum. Betterment`s move comes in response to demand from existing retail clients to be able to customize their exposure in certain asset classes. The business decision of offering this flexibility at no cost, confirms that Customer is King and will remain so forever and ever.
Charles Schwab subscription service rhymes with Apple`s news service. For $30 a month, Schwab offers a financial planning package. Schwab Intelligent Portfolios Premium (rebranded name) is offered at $30 a month after a one-time $300 fee with a $25k minimum. Asset allocation is from a universe of 50+ ETFs, including a financial plan with a customized roadmap and unlimited one-to-one guidance from a CFP professional. Regulated financial-investment advice at $630 for the 1st year and $360 annually thereafter.
Schwab Intelligent Advisory (the original robo name) was at 28bps per annum 0.28% of assets.
Think of the 300,000 Schwab Intelligent Advisory accounts ($37 billion). Some will remain in the free, no-advisory offering. But a significant part will switch over to Schwab Intelligent Portfolios Premium and get advice. Evidently, any account with enough assets ($125k seems to be the magic number) will switch over.
What will this move do to the rest of the large players? When will Vanguard follow suit?
This is another discount brokerage moment in the investment industry. This is the subscription financial advice retail moment. Michael Kitces, the cofounder of XY planning Network XYPN, has deployed a successful subscription-based business for financial advisors, thus proving that it works at the B2B2C level. Now Schwab is pushing for a direct B2C implementation.
 Rethink Impact, PSP Growth, the Melinda Gates’s investment fund Pivotal Ventures; PayPal; Wynn Resorts co-founder Elaine Wynn; former Google and Alphabet chairman Eric Schmidt; former top aide to President Obama, Valerie Jarrett; and Mastercard. Source.
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I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
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