In the early 2010s, the first generation of robo advisors to arrive on the scene like Betterment and Wealthfront made headlines with their promises to replace human financial advisors by automating portfolio management at a quarter or less of the standard 1% AUM fee. But in reality, the original robo advisors were never a threat to human advisors, because they didn't provide advice – all they really did was implement a portfolio based on a short questionnaire about the investor's goals and time horizons. So in reality, financial advisors (at least those who did more than just implement portfolios for a 1% fee) had no trouble holding on to the mass affluent and high net worth delegator clients that they had always served, while the robo advisors created a new lower-cost implementation option for DIYers and those without the assets to meet the minimums of human advisors.
But this arrangement left a sizeable gap in the financial services marketplace: People who wanted personalized financial advice (and not simply the implementation solution the robo advisors offered), but lacked the income or assets to pay the fees charged by human advisors, had few options to meet their needs. By this time in the mid-2010s, the second wave of "B2B" robo advisors had arisen to try to fill this gap: Instead of competing directly against advisors, they instead aimed to serve advisors directly, promising to unlock new efficiencies that would allow advisors to scale up their services and serve more clients for less cost (e.g., by offering a robo-managed portfolio with "light" financial planning to lower-asset clients, in hopes of graduating them to full-fledged wealth management clients when they built up enough assets to meet the advisor's minimums). But once again, the robo advisors misjudged the dynamics of the advisory business: Advisors hadn't been ignoring lower-asset clients because they lacked the efficiencies to serve them; rather, it was because it was too difficult to efficiently market at the scale needed to bring in a critical mass of low-asset (and low-fee) clients to run a profitable mass-market financial planning firm. And so the B2B robo advisor phenomenon also passed without leaving much of a mark on the average financial advisor's fee structure and clientele (although many advisors did ultimately adopt the technology to free up time to do deeper planning for their existing clients).
If there was one development from that era that did seem like it could have a lasting effect on the advisory industry, however, it was the attempts by giant institutions like Vanguard and Schwab to meld robo-managed portfolios with human-delivered financial advice at minimal cost. First, Vanguard launched its Personal Advisor Services in 2014, with a $50,000 asset minimum and a 0.3% AUM fee. And a few years later in 2017, Charles Schwab followed up with its Schwab Intelligent Advisory, which had an asset minimum of just $25,000 and charged 0.28% of AUM up to a maximum of $900 per quarter (and after later rebranding as Intelligent Portfolios Premium, Schwab dropped the AUM fee altogether in favor of a $30 per month subscription fee plus a $300 upfront planning fee). In both cases, the firms bundled together asset management along with "access" to a CFP certificant financial advisor – which in practice usually looked something like a handful of 30-minute phone or video sessions to create an initial plan, plus the ability to schedule additional recurring or on-demand sessions thereafter.
The thinking at the time was that as large and well-known asset managers, Schwab and Vanguard wouldn't have the marketing and distribution issues faced by the standalone robo advisors, and could run their planning services at minimal or even negative margins while still coming out ahead from the management fees generated by keeping clients invested in their firms' funds (and by earning sizeable spreads on those clients' cash sweep allocations). And so at the time there was some real concern that the offerings from the likes of Schwab and Fidelity could drive down the going rate for financial planning and create fee pressure for independent advisors who still charged 1% of AUM for what was (at least on the surface) the same thing that the name-brand firms were charging 0.3% or less for.
However, once again the threat of disruption from low-cost advice never really panned out, as is exemplified by the recent news of Schwab's decision to shutter Intelligent Portfolios Premium early in 2026.
Again the culprit seems to have been a misunderstanding of the value that clients place in financial advice. Vanguard's and Schwab's low-cost offerings made financial planning and advice into a loss leader and an overhead expense, and so there was an imperative to keep costs at a minimum – which meant more clients per advisor, less time working for and meeting with each client, and less likelihood that a client would even talk to the same advisor from one meeting to the next. But the problem is that at its core, financial advice is a relationship business: clients who pay advisors 1% of AUM per year or multiple thousands of dollars in retainer fees aren't paying just for a set of recommendations. They're paying for a person who understands them, who is deeply aware of their values and intentions, and whom they can trust to give recommendations that are in their best interest. Which is a completely different service than a series of 30-minute sessions with a rotating cast of advisors, who may be able to help with relatively simple planning questions but who don't have the deep understanding of the client to get into more complex tax, estate, or retirement planning conversations (let alone matters of financial psychology, money trauma, and financial life planning that advisors are increasingly exploring with their clients).
All of which is why, even as Schwab can't find a way to sustain a $30 per month planning service, independent full-service advisors have had little trouble maintaining or even increasing their fee levels, and PE firms can't seem to find enough cash to pour into serial RIA acquirers. Clients who want financial advice want an advisor they can have a real relationship with, and there's so much demand for that advice that advisors can charge premium fees amid the presence of lower-cost (but lighter-touch) options. Which makes it worth wondering if anyone will ever find a way to profitably serve the "missing middle" of clients who can't pay the fees charged by most financial advisors, but who want real advice from an advisor with whom they can develop a relationship. There's still a viable business model for robo advisors who can serve high volumes of clients at low fees (as the continued existence of Betterment, Wealthfront, and Vanguard and Schwab's 'pure' robo offerings show). And there's a thriving business model for human advisors who can deliver high-touch relationship-based advice at high fees. But for now at least, it appears that nobody wants to be stuck in the no-mans-land between the two.
This article first appeared on the Nerd’s Eye View at Kitces.com at https://kitc.es/advisortech-jan2026, and has been reprinted here with permission.
Ben Henry-Moreland
Ben Henry-Moreland is a Senior Financial Planning Nerd at Kitces.com, where he specializes in writing and speaking on financial planning topics including tax, practice management, and technology. He also co-authors the monthly Kitces #AdvisorTech column. Drawing from his experience as a financial planner and a solo advisory firm owner, Ben is passionate about fulfilling the site’s mission of making financial advicers better and more successful.
Michael Kitces
Michael Kitces is Head of Planning Strategy at Focus Partners Wealth, which provides an evidence-based approach to private wealth management for near- and current retirees, and Focus Partners Advisor Solutions, a turnkey wealth management services provider supporting thousands of independent financial advisors through the scaling phase of growth.
In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.
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