Insights from the experts in investment fiduciary responsibility.

Robos, DOL, and the Future

Posted by Matthew Wolniewicz, AIF®, Chief Revenue Officer, fi360, Inc. on October 01, 2015

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Some of today’s great mysteries include a young adult’s inability to disconnect from an iPhone, if and when the DOL Fiduciary proposal will ever become law, and if robo advice has the ability to replace every one of the 300,000 advisors in existence today.

Is it just me, or is every other financial article about “robos”?  First there was panic/fear when they were launched, followed by tales of why they would fail, and now a split in the public opinion about their future.  It appears the conclusion is they are “dead” if their focus is on the consumer.  However, does anyone remember when cabbies laughed at Uber? 

We should take a quick look at young adult behavior with smartphones, think about the aging population of advisors today, and the shortage of younger adults (especially women) entering the financial advisory industry.  Smartphones are owned by nearly two-thirds (64%) of US adults, but 85% of young adults own one ( In addition, 87% of the young adult users say they never separate from their device, and 78% spend more than 2 hours a day on them (  As the father of two teenagers it is increasingly tougher to have a conversation with the real person who holds the phone; so I doubt they will want to receive advice the way it has been dispensed traditionally.

In light of the proposed DOL legislation around the fiduciary standard, I believe robos can help overcome the primary objections in some form, such as the burden on broker dealers of the proposed regulation and the inability to serve lower and middle-income investors.  Technology is a great "disruptor". Representative Ann Wagner is worried DOL will make advice more expensive for small savers and that low and middle-income Americans will lose access to financial advice. Representative Gwen Moore, who had previously supported that view, has changed her mind and is now supporting the proposed DOL rule.  Wagner is a republican while Moore is a Democrat – wonder if that is a factor? 

Large financial service firms are already either launching their own robos (Schwab, Vanguard, Morningstar leading VC funding for Ellevest) or buying existing robos (BlackRock buying FutureAdvisor, Envestnet purchase of Upside).  Robos have been referred to as “electronic registered investment advisers” (eRIAs), but no matter their focus, when the PE firms want a return on their investments the robos AUM will have to increase significantly.  It has been said robos will need a minimum of $35 billion in AUM to be sustainable, and the largest startups currently have between $2 – 3 billion in AUM (  To put that in perspective Merrill Lynch has over $1 trillion in assets, Schwab raised more than $500 million in three weeks for their robo, and Vanguard's robo had $17 billion when their pilot period ended after the initial launch.

Which robo will survive and thrive?  The consensus seems to be a combination of robo advice plus the traditional advisor component.  I am pretty sure everyone, perhaps even the young adults, will want to speak with someone when there are “big decisions” such as dealing with huge market drops, planning to pay student loans, buying a house, or saving for kids going to college (scary in its own right). Many large firms currently provide different levels of service based on assets. If you are under 100k in assets you get an "800" number to call, 100-500k you can deal with someone in the branch (or a junior advisor), and over 500k in assets you get a “senior vice president” or “private banker”.   

How will this affect our children as they graduate, begin a career, and (hopefully) begin to accumulate some assets?  Will they consider becoming a financial advisor, will more women enter the business, or will they go to YouTube and Vimeo to learn cool things to do with their robo?  The financial industry must continue to innovate the way we service our customers, or Google/Uber/Snapchat will find a better way to serve them.

My thanks to Investment News, Financial Planning, Rediff, and Pew Research for these excellent articles that served as source material:,,,,, ,,,

Mr. Wolniewicz is the Chief Revenue office at fi360.  His team enables advisors to implement a prudent investment process that helps them gather, grow, and protect assets through better investment and business decision making.

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