Overstock.com has introduced a digital investment advice platform on its FinanceHub, bringing robo advice into the online retail space. The retailer has partnered with tZERO Advisors, a registered investment advisor, to launch the service, available to customers for $9.95 a month. The technology is powered by FusionIQ, a financial technology company with a proprietary algorithm for scoring stocks and exchange traded funds.
The news brings a longstanding fear—that large consumer brands such as Amazon and Google will disrupt the financial services industry—into the realm of possibility.
“This service introduces robo-advising investment management services to our millions of customers and continues Overstock’s commitment to bridging Wall Street and e-commerce,” said Patrick M. Byrne, Overstock’s founder and CEO, in a statement.
To get started, investors answer questions about their investment preferences and reaction to market conditions. Users then select from a group of pre-established Adaptive Dynamic Portfolios that align with their risk tolerance. The portfolios use a scoring model based on four dimensions that include: fundamentals, technical, momentum and sentiment.
“If Overstock can come up with a robo advisor or Acorns or Stash, that just tells you that the technology is very replicable and anybody can do it,” said Tim Welsh, founder of Nexus Strategy. “So the question becomes, who has the biggest user base? That’s the big fear, is more so that Amazon has hundreds of millions of customers, and advisors have 100.”
Overstock.com has some 40 million unique visitors per month.
At the same time, Welsh points out that so far, the existing robos have struggled to attract large accounts, and the cost of client acquisition is quite high.
“I think it shows you the vulnerability of a Wealthfront or a Betterment, versus an advisor who has relationships, who can white-label all these robos and launch their own if they wanted to,” Welsh said.
Overstock has been moving into the financial services space over the last year. It became one of the first major retailers to accept bitcoin, and is also developing blockchain technology. The company’s FinanceHub also offers lending, credit cards and insurance services.