Digital? Not when it’s Material!

I blogged a short while ago about Roboadvisors, and with the recent stock market meltdown due to China’s economy slowdown, it’s interesting to see today’s Financial Times talking about the impact on these fledgling firms.

According to the FT, the emergent roboadvisor market that includes Personal Capital, Betterment and Wealthfront, and now managing a combined $100 billion of assets.  Pretty impressive?  Maybe, but they put this in the context that the US wealth management market is worth at least $30 trillion so it’s minuscule today.  Nevertheless, Deloitte are estimating that roboadvisors will take $5 to $7 trillion in assets by 2025, so they won’t be so small then, and the incumbents are now waking up to them.  Charles Schwab launched a roboadvisory service just under a year ago in March 2015, and have already snapped up $5.3 billion in assets under management (AUM).

Nevertheless, the China meltdown has had an interesting side effect in that people want to talk and the larger firms, like Charles Schwab, are relying on good old call centers and blog posts to explain to people what’s happening with their investments, rather than some robocall.  Schwab say that staff are working longer hours as calls have increased 30% since December, as have online discussions.

“There are times when people just want to talk — even if it’s just to reinforce that they’re doing the right thing,” said Tobin McDaniel, San Francisco-based president of Schwab Wealth Investment Advisory, which offers robo services to clients with at least $5,000 to invest.   Equally, Morgan Stanley has said it is looking at a hybrid model — human advisers “augmented” by digital technology — while Bank of America Merrill Lynch is poised to launch an automated offering that could “complement” financial advisers, according to a spokesperson.

In other words, we may live a digital world, but when it comes to our Material World, we still need the human touch.