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COVID-19 to Take Hybrid Robo Advisors Mainstream

CB Insights says the recent market volatility shows that investors still want a human advisor relationship.

Like other segments of the economy, the fintech and wealthtech sectors have not been immune to the effects of the global pandemic. Research shop CB Insights says the virus has changed its short- and long-term outlooks for the segment, and while investment in the fintech space has been muted in the first few months of the year, the firm believes the pandemic will increase the engagement with hybrid robo-advisory services over the long-term.

Despite the success of automated investing platforms Betterment and Wealthfront, CB Insights says the recent market volatility shows that investors still want a human advisor relationship. In fact, users of the Betterment and Vanguard hybrid platforms were more highly engaged with human advisors in the first quarter.

“Over time, this could lead clients to move toward established players like Fidelity and Charles Schwab, which incorporate more established hybrid advisory services alongside zero-commission models,” CB Insights writes. “More recent entrants like Personal Capital and Betterment also provide hybrid robo-advisory solutions and will have to compete with incumbents on pricing to maintain their respective customer bases.”

Over the short team, CB Insights says wealth management and capital markets players, such as Robinhood and Stash, are shoring up cash balances. There’s also increased consolidation within the fintech and wealthtech sectors, as smaller firms struggle to be profitable. Recent examples include Franklin Templeton’s purchase of AdvisorEngine and SoFi’s acquisitions of payments platform Galileo Money and Hong Kong-based brokerage 8 Securities.

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