Who are robo-advisors?
Robo-advisors refers to algorithm-based automated investment services with investors not having access to a human advisor.
Good examples include Wealthfront (0.25% AUM fee) and Betterment (0.15% AUM fee), both of which provide no human advisors, or Personal Capital (0.95% AUM fee with minimum $100,000 account value), which is a technology-driven platform for human financial advisors engaged virtually with investors.
With a flat 0.3% AUM fee, VPAS is barely above the true robo-advisors' fees, but offering real human advisor interactions, which even at Personal Capital, are priced much higher.
Are Robo-advisors doomed?
Not necessarily, it just means more competition and those robo-advisors need to offer differentiated services to attract customers. For example -
- Wealthfront has unique offerings like Wealthfront 500 for its more affluent investors and single-stock diversification service
- Betterment is pivoting towards partnering its vertically integrated platform directly with advisors as “Betterment Institutional”, it also offers a new retirement income solution for its older clientele
- Personal Capital has its unique financial dashboard/mobile app (which in practice is both its differentiation, an operational efficiency, and its implicit marketing program for new client acquisition).