Despite the growth in the number of robo-advisors and the size of assets they control, many investors are unfamiliar with digital advice services. Less than half of investors with $10,000 or more in investments polled in a new Wells Fargo/Gallup survey said they had heard about robo-advisory technology, and only 5% reported that they actually use a robo-advisor.
“Automated investing tools are still in their infancy, but we expect awareness to grow quickly,” said Devon McConnell, head of Digital for Wells Fargo Advisors, in a statement. Robo-advice now is like online shopping was 10 years ago – in the early stages of adoption, which will grow as “investors become familiar and comfortable with these new ways of investing,” said McConnell.
Wells Fargo itself had previously telegraphed its intention to develop a robo-advisor capability within its Wealth and Investment Management division. The head of that division, David Carroll, said in late May that Wells Fargo planned to announce a partnership tied to a robo-advisor-type offering by the end of the second quarter.
Now that that the second quarter has come and gone, Wells Fargo could be announcing as early as next month a robo-advisor pilot that would be introduced in early 2017, said McConnell in an interview with ThinkAdvisor.
“We’re still nailing down a delivery strategy,” said McConnell, noting that the bank hasn’t decided whether to develop its robo-advisor strategy internally or in partnership with another firm.
Eventually Wells Fargo’s robo-advisor offering will be available through the 15,000 financial advisors that the firm employs – the bulk of them (13,000) working in the Private Client Group and in the Wealth Brokerage Services – and directly to consumers, who may or not already be clients of the bank.
The Wells Fargo survey found that even though many investors are not aware of robo-advisory services, 60% of those who have a personal financial advisor would like their advisor to use digital investing tools and 54% said they would trust the advice of an advisor who’s tech savvy over one who is not.
Not surprisingly, investors under 50 were more comfortable with their advisor using digital investment tools.
Sixty-eight percent of those investors were interested in having their advisor use digital investment tools versus 55% among investors 50 and older, and 63% of investors under 50 said they would have more trust in an advisor who offered them access to sophisticated digital tools than an advisor who did not. The comparative percentage for investors 50 and over was 48%. Wells Fargo advisors are already using technology in their daily practice and gaining access to new tech tools and applications as they become available, such as the Client Dashboard announced last month that allows advisors to consolidate different applications and information about a single client on one page. Other tech apps for advisors include Wells Fargo’s Envision application for investment planning and the Smart2Go mobile app that advisors can use with clients.
“Our advisors are very much engaged in those tools,” said McConnell.
The upcoming robo-advisor application will be “another product in their toolkit for clients,” said McConnell. It will also enable advisors “to start to engage that next generation of investors, particularly those within our bank who have started to move on a path where they have savings and should be starting to think about investing,” said McConnell.
One question that Wells Fargo and other firms have concerns how the DOL will view robo-advisors under its new fiduciary rule. “There are still a lot of questions as to exactly how the DOL will approach robo-advisors,” said McConnell. “That’s something we’re all still waiting to learn, but we are actively making sure that we’re going to have the right solutions for clients.”
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