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Robo Advisor Technology for Retirement Professionals

Robo Advisor Technology for Retirement Professionals

Robo advisor technology during the early days was about positioning to gain access and serve the masses.  That strategy for robo advisor technology has encountered unforeseen challenges and experienced degrees of success.  Now robo advisor technology is being repackaged for use by, of all things, human advisors! The robo advisor technology behind Vanguard’s retail-facing offering is now slated to be accessible to financial advisors.  Based on an article published in FinancialPlanning servicing the human advisor is a concept that Vanguard is actively working on. However, according to Vanguard, the timing and details of the hybrid robo advisor’s release are not yet public.

Vanguard’s robo technology is something advisors are interested in.  The registered investment advisor (RIA) and the largest provider of mutual funds have been fielding numerous requests from advisors asking for access. Vanguard is listening to advisors and plans to deliver on a hybrid robo advisor technology solution.  The end result will be a part robo and part human advisor – designed especially for its advisor partners.

Vanguard’s retail-facing robo advisor technology solution is now four years old. Named, Personal Advisor Services.  According to FinancialPlanning, citing data from Vanguard, the firm has $130 million in assets under management (AUM). It is one of several retail-facing hybrid robo advisor offerings available in the market today. FinancialPlanning noted that Vanguard’s Personal Advisor Services charges 30 basis points. Betterment charges 40 basis points for its robo advisor, and Charles Schwab provides its robo advisor for $30 a month, with a $300 up-front fee. Currently, Betterment and Schwab does offer robo advisor technology to advisors, according to FinancialPlanning.

Vanguard is well-known for its retail-facing offerings and its retirement plan services. However, the move to offer robo advisor technology to advisors should expand Vanguard’s advisor relationships. According to Tom Rampulla, head of Vanguard’s Financial Advisor Services division, who was quoted extensively in the FinancialPlanning article, advisors manage about 35% of Vanguard’s $5.6 trillion in AUM. Vanguard’s financial services division was launched in 2002; currently, it serves 60,000 advisors, including those from Merrill Lynch and Creative Financial Planning. Vanguard offers education and consulting for advisors, such as coaching on portfolio gaps and on explaining their business model, FinancialPlanning noted. The firm also provides advisor tools, in the form of marketing materials and portfolio analysis.

The firm’s hybrid robo advisor technology offering for financial advisors will not be a face-to-face solution. According to Vanguard’s Rampulla, as quoted in FinancialPlanning, Vanguard isn’t aiming for that level of customization with this solution. More than 90% of its clients are existing Vanguard clients, however, and Rampulla noted that they have been asking for an advisor-focused solution for a long time.

Robo advisor technology offers investors the best of both worlds.   It bridges the gap between 100% automated investment advice and comprehensive financial planning. Many investors appreciate the ease and convenience of a robo advisor technology, but they also benefit from having an advisor to talk to in order to get help with an investment strategy or validate a decision. Advisors can also step in and can advise against investors from making emotion-driven decisions that may not be in their best interest.

Vanguard’s foray into an advisor offering is significant, and it will be interesting to watch its impact as it comes to fruition. It is something for plan sponsors and plan advisors to pay attention to in the coming months. It is evident that more financial advisors are turning to technology, including robo advisor technology, to better serve their clients.

Steff Chalk

Steff Chalk

Managing Editor at 401kTV
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff also serves as Executive Director of The Plan Sponsor University and is current faculty of The Retirement Adviser University.
Steff Chalk
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