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Sep 9, 2020
News || Business | Companies | Asset Managers | Robo-advertisers: Robo-advisers make slow progress gaining ground with investors
Many large asset managers have shelled out time and money to
develop robo-advisers. But, while assets invested in them are growing,
only a small proportion of investors actually use such digital services,
according to a report by data and analytics firm Hearts & Wallets.
Just
8 per cent of US households report having money in such services, which
typically rely on portfolios made of ETFs,, the report says. The
company produced its report based on a survey of 5,641 households in
July 2019.
That amounts to roughly 10m households nationwide,
according to Hearts & Wallets. The company came up with that figure
by examining quantitative data, as well as statistics from the US Census
Bureau, Federal Reserve Flow of Funds and Survey of Consumer Finances, a
company official said.
Robos collectively managed $631bn in
assets in the US as of June 30, or 13 per cent more than they did a year
ago, according to Backend Benchmarking.
More than half of
investors who use robo-advisers appear to be nudged into them by
companies whose funds they already use, the Hearts & Wallets study
found.
Roughly 13 per cent of Charles Schwab clients have money in
a robo, including some run by Schwab and some potentially run by other
companies, the company estimates. And 10 per cent of clients who own
funds manufactured by Vanguard or Fidelity have money in robos, it said.
Meanwhile, fewer than 10 per cent of T Rowe Price’s clients are
enrolled in a robo. T Rowe offers an online programme called ActivePlus
Portfolios to clients with more than $50,000 to invest, according to its
website.
This article was previously published by Ignites, a title owned by the FT Group
Though
it is possible that some of those customers have money in other robos,
Laura Varas, chief executive of Hearts & Wallets said she suspected
most are enrolled in robos from the companies they already work with
because such groups have far reach. Hearts & Wallets estimates that
45 per cent, or 58m US households, are aware of or serviced by large
asset managers, most of whom have robos.
Most of the clients
enrolled in Vanguard’s robos — Digital Advisor and Personal Advisor
Services — were existing Vanguard clients, a spokesperson for company
said.
“A critical component of the advice process is identifying
the type and approach that best fits each individual’s needs and
preferences,” she said.
Digital Advisor, for example, targets
young investors who prefer an online experience and are seeking guidance
on how to save for retirement or pay down debt, she explained. Personal
Advisor Services, meanwhile, are meant for those who would need help
from an adviser to deal with more “complex” financial situations,
including those nearly or already in retirement.
Use of robos is
highest among millennials and so-called Generation X households (those
born between the mid 1960s and early 1980s), with 13 per cent and 10 per
cent respectively enrolled in robos, according to Hearts & Wallets.
Meanwhile,
Fidelity keeps its marketing messages for its robo services consistent
across existing fund clients and prospective customers, a spokesperson
said.
“We do not narrow our marketing to customers based on any
product ownership, but we do focus in on customers who are a bit younger
and have a lower balance than an average retail investor,” he said in
an email.
Fidelity Go has mutual funds from the company’s Flex
series within its portfolios. The robo slashed fees recently to appeal
to low-balance clients.
Inside ETFs
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you independent and reliable data alongside our essential news and
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management and advice on constructing your portfolio. Find out more here
The
app previously charged annual fees of 35 basis points. But since August
1, only clients with account balances of $50,000 and above have to pay
that fee. Those with between $10,000 and $49,999.99 pay a monthly fee of
$3. And those with less than $10,000 are not charged an advisory fee at
all.
Meanwhile, standalone robos and investing apps are slowly
gaining client interest, too. These robos built significant brand
awareness between 2015 to 2019, Hearts & Wallets found.
Some
33 per cent of survey responders said they were aware of Acorns and
Mint, which had the highest national awareness scores among standalone
services, according to 2019 data from Hearts & Wallets. In 2015 only
11 per cent of survey responders knew what Acorns was, and just 16 per
cent had heard of Mint.
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