Wealthfront’s acquisition of hybrid robo-advisor Grove probably will not have a significant affect on traditional financial advisors and the overall industry, according to top industry observers.
The acquisition won’t have “any material impact to the industry at all,” Timothy Welsh, president of Nexus Strategy, predicted Friday. After all, he told ThinkAdvisor: “Robo assets are tiny on the independent side. Meanwhile the big brands such as Fidelity, Schwab, Vanguard continue to dominate and expand their leads.”
Today, “there are no barriers to entry in the robo space as it has become completely commoditized, as evidenced that a new player (Grove) is acquired by a legacy player Wealthfront,” he said.
According to Welsh, “This development is also another sign of the desperate times to be a [business-to-consumer] robo platform, where your own tech innovation is being eclipsed by a few guys in a garage with an algorithm and you don’t even want their clients or their AUM as those are non-profitable.”
Welsh was referring to the fact that while Grove’s product team is being gobbled up by Wealthfront after the acquisition, Grove’s financial planning clients will be transitioning to Facet Wealth instead of becoming Wealthfront customers.
“Grove’s product team will be joining Wealthfront to help us bulk up our efforts to build” the firm’s Self-Driving Money platform, while Grove’s clients “will have the option to transition to Facet Wealth,” Wealthfront spokeswoman Kate Wauck told ThinkAdvisor Friday.
This is because Grove clients “signed up for a hybrid financial planning service and we respect this preference — it’s just not what we offer or plan to offer,” she said.
As part of the deal — the terms of which were not disclosed — Grove CEO and co-founder Chris Hutchins is joining the Wealthfront team.
Using the Self-Driving Money platform, Wealthfront clients will be able to deposit their paychecks into its system, according to the company. Technology “will handle the rest, ensuring that bills are paid, the right amount of money” is in their emergency funds and they’re “contributing to the most appropriate investment accounts to achieve” their specific goals and maintain their lifestyles, it said.