Once touted as Wall Street’s greatest disruptors, robo-advisers are now integral parts of the wealth management strategies at some of the industry's largest companies — including Vanguard Group Inc., BlackRock Inc. and UBS Group — and are amassing billions of dollars in assets in the process.
With the January announcement of UBS' $1.4 billion acquisition of Wealthfront, the robo-advice industry has officially hit the mainstream, meaning venture capital and private-equity investors will likely be looking to sell their stakes to the highest bidder.
That was the takeaway from the fourth-quarter Robo Report by Backend Benchmarking, a quarterly study that grades more than 20 digital platforms across 45 specific metrics, including performance, financial planning, customer experience and access to live advisers.
The research found that while many early entrants into the market have been acquired by larger firms, the smaller companies never reached the scale necessary to become profitable.
“Robo advisors have fundamentally changed financial advice by making professional advice available to anyone and making quality financial plans widely available at little or no cost,” Thomas Leahy, senior investment analyst at Backend Benchmarking, said in a statement.
The edition tracks 58 accounts at 35 different providers and includes both qualitative factors, such as financial planning features, as well as the performance metrics of the accounts held at each provider.
The top three performing robo-advisers of 2021 were Schwab’s Domestic Focus portfolio, Zack’s Advantage and Marcus Invest Core IRA.
The best overall robo for the fourth quarter was SoFi Technologies Inc., due in large part to a stellar performance record, low cost and access to live advice, according to the report. Strong performance as well as a balanced platform gave SigFig and ETrade Financial Corp. the second and third spots, which rounded out the top three best performers.
Vanguard Personal Advisor Services also took a top billing as the best robo-adviser for complex financial clients due to its industry-leading hybrid adviser. Betterment’s easy-to-use digital tools, tiered platform and variety of investment options helped it win the best first-time investors award.
"Thanks to strong performance, an undeniably strong suite of products and services, as well as little to no management fees, SoFi has maintained its spot as the Best Overall Robo Advisor,” David Goldstone, manager of research at Backend, said in a statement.
Fidelity Go, a perennially strong performer in previous rankings, was also backed by strong digital planning capabilities and the option to upgrade to a live adviser and took the runner-up position for Best Overall Robo.
“When looking at the five-year period ending Dec. 31, 2021, Fidelity Go, SigFig and Axos were the top performers for the half-decade," Leahy said.
Assets under management in the U.S. robo-advice segment are projected to reach $1.2 trillion this year, and are expected to top $2.1 trillion, with more than 500 million users, by 2026, according to data from Statista.
“We are helping families take an important first step toward building a financial foundation for the next generation,” said Franklin Templeton CEO Jenny Johnson
Richard Brothers Financial Advisors joins the fee-only RIA, adding its first Maine office and $240 million in client assets
Cleveland RIA grows to $68 billion in assets as Philadelphia team, deepening its high-net-worth and retirement-plan practice.
Financial planning leaders say unresolved rules on fees, Roth conversions and financial aid complicate comparisons with 529 plans.
AI can personalize at scale, but without trust, it falls flat.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
