No matter how you feel about the term “robo-adviser,” it’s becoming clear that automated investment advice is here to stay.
Charles Schwab just announced that its own robo-adviser will become operational in early 2015.
A Schwab executive told Reuters that “the program is aimed at neophyte investors as well as ‘fee-sensitive’ experienced investors.”
The $US5,000 minimum is right on par with Wealthfront, the automated investment platform that manages over $US2.5 billion in client assets, which also made a big announcement this week: $US64 million more in funding to make investing painless for clients.
President and CEO Adam Nash writes on the Wealthfront blog:
When we launched Wealthfront less than three years ago, the industry was sceptical that investors would adopt, let alone prefer, an automated investment service.
The sceptics didn’t understand that there were millions of millennial investors who were fed up with Wall Street and looking for a new type of service …
Now the industry has woken up. Soon, the large incumbents will roll out their own automated services. In fact, thanks to Wealthfront’s success, we now believe almost every investor will be using some form of automated investment service in the next 5-10 years.
It will be interesting to see how companies under the robo-adviser umbrella coexist going forward — earlier this month, Betterment announced an alliance with Fidelity Investments to promote its new adviser-facing product.
Some projections estimate that robo-advisers will be managing as much as $US255 billion within the next five years, and that estimate doesn’t include robo-advisers connected with already-established names like Charles Schwab.