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Startup Robos Beating the Big-Name Firms on Client Experience

A Corporate Insight study finds that robo startups still have better, more engaging websites than incumbent firms.

News that Vanguard Personal Advisor Services now manages $83 billion in assets gives weight to the argument that the hybrid model is the way forward for the industry, and that digital startups simply can’t compete.

But having the most assets hasn’t necessarily translated into the best service. According to a new analysis by Corporate Insight, many hybrid robo advisors, including Vanguard’s, aren’t keeping up with the startups in terms of providing a seamless, modern website for their digital customers.

The report suggests that these shortcomings could be impeding investment returns.

“Capital One Investing, Personal Capital and Vanguard [Personal Advisor Services] all require automated managed account clients to speak with [a financial advisor] to adjust their risk profile and portfolio allocation,” Corporate Insight reports. Personal Capital goes even further by not allowing a client to initiate a withdrawal without first having a conversation with a human advisor. “While this tactic gives FAs an opportunity to dissuade clients from removing any funds, potentially preserving assets with the firm, it also risks frustrating clients."

Corporate Insight reports that while all incumbents say they are investing heavily in digital advice, only three–Charles Schwab, Merrill Edge and TD Ameritrade–offer distinct private websites for digital-advice clients. By doing so, these three firms can put clients’ portfolios front and center, enabling the firm to prioritize calls to action that can help acquire additional assets.

Vanguard, as well as Ally Invest and Fidelity, have instead added a digital-advice-focused section to their standard brokerage websites that are only accessible to customers with automated accounts. Corporate Insight did note that Vanguard’s is much more advanced than Ally’s and Fidelity’s, allowing PAS clients to access a dashboard displaying portfolio allocation, holistic goal progress and aggregated external account balances.

Capital One Investing and E*TRADE don’t provide any unique digital-advice features to their private client websites.

While the robos may trail many of the incumbents in terms of AUM, Corporate Insight said they are leading the way when it comes to encouraging clients to invest more money.

Betterment, for example, has prominent buttons to add accounts or start a rollover, includes a universal “Deposit” link in its header, and has several pages emphasizing the value of recurring deposits. Conversely, the option to withdraw funds is hidden under tabs. Wealthfront and SigFig are similar in this regard.

The startups also emphasize the ability to add new goals and a corresponding portfolio, while incumbents make it more difficult. Betterment and Wealthfront both bypass the investor questionnaire process for these new accounts, instead porting over existing risk-profile and financial information to make a recommendation and speed up the process. Clients can adjust the recommended allocation before funding, and are allowed to make additional changes whenever they want.

Other than Wealthfront, the robos also leverage account aggregation to provide analysis that encourages clients to transfer outside accounts to the robo. Wealthfront’s aggregation tools currently don’t make these suggestions, though in the past it could identify high fees and offer transfer to Wealthfront as an alternative. Corporate Insight said that Vanguard was the only incumbent firm to offer account aggregation as a core element of digital advice.

Because robos are built around passive, buy-and-hold investing for retirement, most firms provide projection charts, but Corporate Insight said the startups offer more comprehensive tools, with Betterment and Personal Capital leading the way.

Overall, the startups remain superior in terms of technology and digital engagement. It remains to be seen if this can translate into closing the AUM gap.

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