RBC Wealth Management says it wants to switch its robo plans from “go” to “wait and see.”
“The FutureAdvisor project [with BlackRock] is on hold so that we may address other priorities, specifically, DOL fiduciary standard-related work,” the firm said in a statement on Wednesday.
But as news about RBC’s move spreads across the industry, at least one consultant is asking which firm will be next to change its approach. (The RBC development was first reported by Financial Planning.)
“Stay tuned for more on the strategically canceled” or put-on-hold robos, said Tim Welsh, head of Nexus Strategy, in an interview. The consultant expects plenty more robo plans to go “back to the drawing board.”
“Absolutely, this will happen as more get rolled out [or near rollout]. We’ll see some in the first year that will show results that are not what firms had planned or expected. Dozens of firms went into this with a herd mentality vs. a clear strategy.”
Many broker-dealers felt they needed to add a robo channel “right away like everyone else,” Welsh says. “But it’s really a strategic question: Why do you think you need to do it? Why do you really have to do it, and what are the strategic factors driving it?”
LPL Financial, now working with FutureAdvisor, moved full steam ahead back in 2012 with its NestWise robo. But it then abruptly closed the unit in 2013 to “save costs.”
“If you don’t do [the strategic] thinking, it can cause you to rethink the robo plans,” Welsh said. “LPL rolled out its own robo about five years ago and then killed it for [this] reason … And here we are, and [LPL] is back at it again.”
In other words, broker-dealers must do the tough thinking upfront — or else. “False starts happen for a reason,” the consultant explained. “You can’t just robo to robo or you end up like LPL, which moved early and then shut it down.”
(LPL says its new robo advisor is “in a pilot stage” and that it plans to make its Guided Wealth Portfolios available to advisors “in the coming months.”)
Speaking about the broker-dealer business in general, Welsch added: “Knee jerk reactions are never a good idea. There are multiple challenges with automated or digital advice. It’s not as simple as it sounds to bolt one on to your wealth business.”
Price, Market Pressure
In general, robo technology is meant to help automate work for advisors for a different client segment. The downside is that it pushes down fees and commoditizes the work advisors do.