A mid-year look at Digital investing

I started writing about robo-advice in 2015. I witnessed the impact that the standalone robo-advisors (Betterment, Wealthfront, etc.) had on pushing the industry forward and leading the way for online brokerage firms, asset managers and wealth managers to adopt some version of a robo-advisory service.


The US remains the leader in this market. Leapfrogging from incumbents happened.VCs poured hundreds of millions in standalone robos. Betterment and Personal Capital have raised the most – $275mil and $265mil respectively.

Personal Capital started 2015 with $1billion AUM and just this past week announced that it surpassed the $10billion AUM, an increase of over $2billion since the beginning of 2019 (a 60% growth rate year-over-year). Personal Capital is a digital first robo, with a free planning offering and tiered paid offering that includes annual management fees (starting at 89bps down to 49bps for larger AUM[1]) tax harvesting and access to human advisors. Their growth has been organic – no M&A. According to RIA Personal Capital is the most profitable standalone robo because it has high fees- close to 1% – and its average account balances are also high – around $440,000.

The hybrid model of digital with human advice is clearly where the market has converged to for now. And Schwab brought the financial advice subscription model to the direct to the consumer market, at the end of Q1 2019.

Barron`s reported a few days ago that Schwab Intelligent Portfolios Premium service managed to gather $1billion AUM in just one quarter but more importantly these new customers were 40% wealthier than those that signed up in the previous quarter.[2] Schwab Intelligent Advisory closed 2018 with $33.4billion AUM and by the end of June 2019, had $41 billion (A 23% year-over-year growth).

At the same time, there have been several shutdowns of robo-advisory services both standalones and from incumbents.

LearnVest was shutdown in May 2018, by Northwestern Mutual insurance company after 3 years and an expensive acquisition of $250mill.

Two months later, Hedgeable, the US standalone high-end robo-advisor with, also shut down with no VC funding. Despite their early 2015 collaboration with CircleUp to offer private equity investments and being first to offer to retail a way to invest in Bitcoin.

In August 2018, SmartWealth shut down. This was a one-year-old robo-advisor of UBS for its mass affluent British customers – with more than £15,000.

In the UK market, the robo-advisor offering of asset manager Investec, called Click & Invest, had a similar target audience with more than £10,00. It was also launched in mid-2017 and shut down after 2 yrs (May 2019 FT). Even though they lowered the minimum to £2,500, it proved to be operationally non-viable as it used actively managed funds instead of low-cost ETFs.

Stay tuned

🔥 Will Personal Capital be the first robo-advisory IPO[3]? A profitable standalone with high fees, high balances, a hybrid digital-human model, a hybrid product offering – low cost and alternatives.

One of its notable and different moves is a collaboration with iCapital Network, a 6yr old fintech platform for distributing alternative investments to the lower end of this market. It is used by Carlyle Group, BlackRock, JP Morgan and UBS. This brands Personal Capital to the traditional market and advisors and individuals that have an appetite for Private equity.

🚀 Will aggregated AUM growth accelerate, while a mix of shutdowns and new hybrid business models are being tested?

Current AUM are just below $300billion and Aite`s US Digital mgt biannual report[4] estimates that

Assets under management on robo-advice platforms will reach US$1.26 trillion by 2023.


That is more than a quadruple increase over the next 4yrs. Aite had estimated Aite Group estimated a US$166 billion, a 10-fold surge of robo-advisors in AUM in 2017 from 2014 (pretty close to what has happened).

[1] Tiered annual management fees start at 0.89% of assets up to $1 million and go down to 0.49% for invested assets over $10 million. Source

[2] In other words, for Q1 2019 the Schwab Intelligent Advisory was charging 28bps annually AUM and then switched in Q2 2019 to the Schwab Intelligent Portfolios Premium service flat subscription fee: A one-time $300 fee for financial planning and then $30 each month for investment management and unlimited access to certified financial planners. Details here.

[3] https://riabiz.com/a/2019/3/22/with-ipo-clock-at-10-years-and-ticking-personal-capital-makes-two-big-out-of-character-moves-to-go-upmarket-and-downmarket

[4] Aite Group report here.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

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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