The digital advice market for the mass affluent, which began with online-only startups like Betterment and Wealthfront, is on the verge of morphing into yet another financial services channel dominated by the biggest firms, namely Vanguard and Schwab (which acquired TD Ameritrade). Even Goldman Sachs is expected to join.
The growing ubiquity of robo-advice means more investors than ever have access to these services, long before they amass enough assets to catch the attention of traditional advisors, according to a leading researcher in the space.
Vanguard already leads the robos in assets under management with $148 billion in its Vanguard Personal Advisor Services, but later this year the fund giant plans to offer an all-digital low-cost service called Digital Advisor. That offering will require a $3,000 minimum, far less than the $50,000 for Personal Advisor Services.
Schwab follows Vanguard in digital AUM, with $43 billion, then TD Ameritrade, which Schwab is acquiring, with roughly $21 billion. Eventually these assets will come under the Schwab umbrella once the two firms integrate their services, which is expected to take two to three years after the deal closes later this year. Both firms currently offer a no-frills and a premium digital advisor account.
Betterment and Wealthfront, the biggest independent robos, are next in terms of AUM, with $22 billion and $23 billion respectively, including cash management banking accounts they have both introduced.
Fidelity offers a digital-only service, known as Fidelity Go, and a hybrid robo involving human advice called Fidelity Personalized Planning & Advice, but its AUM is not disclosed.
Attention now turns to Goldman Sachs, which along with rebranding United Capital as Goldman Sachs Personal Financial Management, recently announced plans to launch a wealth management robo offering for the mass affluent later this year, linked to its Marcus by Goldman digital bank.
Goldman will be joining other big banks and brokerages offering digital advisory services, including JPMorgan, Merrill, Morgan Stanley, UBS, Wells Fargo and Citigroup, which opened its own robo just a week ago.