JPMorgan Chase & Co.
made waves Tuesday when it introduced You Invest, a mobile brokerage app launching next week with free and discounted trading for retail investors.
The news was a direct shot at discount brokerages. Shares of Charles Schwab, ETrade Financial and TD Ameritrade all tumbled on the JPMorgan news.
(More: What's in a name? For TCA by ETrade, everything)
But the app could eventually have even more of an impact on financial advisers. According to a
CNBC report, JPMorgan plans to add automated investing to You Invest in January, officially joining a robo-advice market jammed with competition from fintech start-ups, large financial institutions and even independent broker-dealers and RIAs.
So what do financial advisers think? Tyrone Ross, managing partner at Noble Bridge Wealth Management, loves it.
"It's never been a better time to be an investor," Mr. Ross said. Options traditionally reserved for accredited investors are being made accessible and affordable to more consumers, and the competition will make things better for the industry, he said.
While the average adviser — "a 55-year-old, grey-haired gentleman at Merrill Lynch who manages money for clients," as Mr. Ross put it — might not think much about You Invest, younger advisers should pay attention.
"What you're seeing here is the push for millennials, who are getting into their 40s," Mr. Ross said. "If you're advising those clients … you're going to have to embrace technology like this and work alongside of it."
By adding a robo-adviser, platforms like You Invest give big banks the firepower to capture wallets from the first time an individual makes a trade. They can offer wealth management for cheap and introduce other services as the client matures, from loans to mortgages to private banking.
(More: Wirehouses using digital advice technology to boost cross-selling)
Bill Winterberg, the founder and CEO of FPPad,
thinks these free trading apps will put pressure on other firms' client acquisition costs.
"Emerging investors start with free trading because they have small account balances," Mr. Winterberg
tweeted.
As they save and grow their wealth, they are more likely to stay with the firm because transferring an account "is a huge PITA," or pain in the rear. "If [JPMorgan doesn't] expand their wealth management business, they can at least upsell all their free-trading customers into credit cards, managed funds, mortgages, loans and more," he tweeted.
Others were less impressed by the news. For
Matthew Ricks, an adviser with
Wells Fargo Advisors, it's just another step in the ongoing fee compression story.
Pinnacle Advisory Group director of wealth management Michael Kitces
said JPMorgan could eventually launch tiered advice services, like
Betterment's premium offering. Until then, he doesn't view this app, or similar services from companies like
Robinhood, as competing on financial advice.
But Mr. Ross thinks You Invest is more proof that advisers need to demonstrate value beyond stock picking or basic
financial planning. He also thinks it's only a matter of time before JPMorgan includes hip features like cryptocurrency trading (something CEO Jamie Dimon has expressed interest in).
(More: JPMorgan Chase sued for charging 'sky-high' fees for crypto purchases)
"There's a line being drawn where you're going to be able to go anywhere and get a portfolio. Anywhere. I can put money into some type of Robinhood or Acorns and have them manage it for me," Mr. Ross said.
Though these apps can't yet match the advice capabilities of a human, he thinks
advances in artificial intelligence will make automated investing more sophisticated. The free model will lure investors in and algorithms will handle the rest.
If traditional advisers can't offer anything more, it won't be long until they're priced out.
