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Technology > Investment Platforms > Robo-Advisors

JPMorgan to Unplug Its Robo-Advisor, Citing Weak Demand

By Dinah Wisenberg Brin

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JPMorgan Chase plans to close its robo-advisor business next year, indicating weak demand for the service and becoming the latest big firm to let its automated investing offering fall by the wayside.

J.P. Morgan Wealth Management will discontinue its automated investing program in the second quarter of 2024, a spokesperson confirmed via email.

“The robo investing business did not take off in the wealth industry as expected. It hasn’t scaled or become profitable for many, including us. We believe our Self-Directed and Advisor-led platforms offer great alternatives to our clients and are focusing our resources there,” the spokesperson said.

 JPMorgan’s service is the most recent in a “growing number of robo advice products that have been given up on,” David Goldstone, investment research manager at Condor Capital Wealth Management, noted via email.

Earlier this year, BlackRock sold FutureAdvisor to Ritholtz Wealth Management, and Blooom, a retirement-plan robo-advisor, closed late last year, adding to the ranks of closed products, alongside Northwestern Mutual’s LearnVest, John Hancock’s Twine, Motif and many others, he said.

“Profitability and scale have long been a challenge in the robo advice industry. I think that many incorrectly thought that the low cost and ease of robo advice products would essentially sell themselves and easily attract new customers,” Goldstone added.

“While highly scalable, robo advisors charge very low fees and often have low average account sizes, making it difficult to turn a profit, especially if customer acquisitions costs were higher than anticipated,” he said.

Generally, robo advice has proved a difficult business model, according to Goldstone.

“Those that have reached scale, like Vanguard, Schwab, Betterment and Wealthfront, appear like they have a sustainable robo-business,” he said. “Many other products, even those at major institutions like JPMorgan I believe have struggled to gather the clients and AUM necessary to make the robo line of business viable in the long run.”

Joshua Brown, Ritholtz Wealth Management CEO, said in a LinkedIn post this week that the JPMorgan platform was shutting down “not due to lack of trying or investment or expertise — but because people want more and more is a different type of engagement. More means personalized. Personalization requires talent and attention. You have to charge something in order to be able to provide that.”

While automated asset allocation is more beneficial to mass affluent investors than the commission-laden brokerage products of yore, ”it’s not advice,” Brown continued. ”Advice is advice. When people get ill, their first instinct isn’t ‘what’s the fastest, cheapest doctor?’ When they get into legal trouble, they don’t search for ‘the most convenient, easy to access’ lawyer. And when they’ve got money at risk, a future to plan for, career complexity and the stark inevitability of death and taxes at their door, they certainly don’t prioritize ‘user interface’ when looking for answers.”

Image: Adobe Stock

Dinah Wisenberg Brin

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