The increasingly competitive robo-advisory space just suffered a notable failure when New York-based Hedgeable announced it was closing its investment management portal.
As of Wednesday, Hedgeable was no longer accepting new deposits, and as of Aug. 9, client accounts will move to Folio for self-directed management if their owners haven’t already transferred them to another advisor or brokerage.
“Smaller and midsize robos struggling to achieve scale are going to have difficulties,” says David Goldstone, analyst at Backend Benchmarking, which publishes The Robo Report. “Customer acquisition costs are higher than many people expect.”
Indeed, WorthFM, a small robo-advisor focused on women, announced its closing in December.
Hedgeable, which was one of the first robo-advisors, launched in 2010, is also small but not focused on a niche market. It has just under 1,700 clients (with 1,930 accounts) and $79.9 million in assets, according to its latest Form ADV filing, and its fees aren’t cheap — a 0.75% wrap fee for accounts under $50,000 in assets and 0.60% for accounts under $200,000. In comparison, Betterment charges an equivalent 0.25% and Vanguard 0.30%.
Unlike many other robo-advisors, Hedgeable “was very adamant about active management … trying to attract investors who didn’t want index funds of Betterment or Wealthfront … and even touted Bitcoin derivative allocations,” says Bill Winterberg, founder of FPPad.com, a technology consulting firm that serves financial advisors.