Robos to make banks a bigger competitor in advice market

Younger generations may opt to go robo at their local financial institution rather than seek out an adviser

Dec 2, 2016 @ 12:49 pm

By Liz Skinner

Financial advisers may find they are increasingly competing with banks and credit unions for new clients, as more of these traditional savings institutions deploy robo advisers for customers.

Although most aren't yet offering access to digital platforms, in recent months a number of institutions have inked deals with robo advice providers, including Wells Fargo, Citizens Bank, U.S. Bancorp, BancAlliance and Navy Federal Credit Union.

“I don't think advisers have to worry about losing their current clients, but there will be more competition from banks for getting that new, mass affluent client,” said Michael Wong, a Morningstar senior equity analyst. “The regional branch adviser is becoming more well-equipped to service customers.”

(More: Bank teams up with FutureAdvisor to offer clients investment platform)

Advisers who serve high-net-worth individuals and families probably don't have to worry about the pressure from banks, he said.

Financial planners mostly haven't worried much about advisers at retail bank branches because they typically have access to limited investment products and aren't trained to offer holistic planning.

Davis Janowski, a senior analyst for digital wealth management at Forrester Research, said banks have some advantages in the mass affluent marketplace, most notably because they already have millions of clients and large brand footprints.

“Bank robos will be attractive to the more cost conscious Generation Xers and Millennials, who prefer the convenience of digital,” he said.

But banks also have their challenges, analysts said.

“The major disadvantage for banks is a trust issue,” said Mr. Janowski, who is completing a report on banks and robos that's due later this month. “A painful example of that is Wells Fargo's misdeeds.”

Wells Fargo employees allegedly opened millions of fake accounts to meet sales goals and in September it agreed to pay a $185 million fine and refund $5 million in fees wrongly assessed customers.

Last month Wells Fargo said it will team with SigFig to provide its wealth management and retail customers with robo advice.

In the most recent deal, announced Thursday, Citizens Bank, which has $147 billion in assets and 1,200 branches, hired SigFig to provide automated advice to mass affluent and wealthy clients.

The move is part of the bank's “strategy to deepen relationships and provide investment and retirement services for customers,” it said in a release.

On Wednesday, Navy Federal Financial Group, a unit of the $78 billion Navy Federal Credit Union, selected Folio Investing to provide online trading and a robo adviser for clients.

In July, hybrid online wealth manager Personal Capital announced a deal to provide its services to Alliance Partners, which manages BancAlliance, a network of community banks in 40 states.

(More: Boston-based Cambridge Savings Bank partners with robo adviser SigFig)


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