California-headquartered Wells Fargo takes a push at the robo-advisor space with a new offering.
Wells Fargo has launched a new robo-advisor service that is pitched at DIY clients as banks continue to battle to provide such offerings and ward off competitive threats from fintechs.
To use the service, clients must have at least $10,000 to open an account and they will be charged an annual advisory fee of 0.50 per cent of assets, in addition to any fees levied by fund managers, the San Francisco-headquartered bank said in a statement yesterday. Additionally, clients can secure a discounted fee of 0.40 per cent if they have $25,000 in deposits or $50,000 in combined banking, brokerage and credit assets at Wells Fargo, it said.
Features include online investment profiling, phone access to financial advisors, and daily and ongoing portfolio monitoring and management. The option to open individual and joint brokerage accounts, Traditional IRAs, Roth IRAs or SEP IRAs that are backed by a 90-day satisfaction guarantee. Portfolio recommendations are based on customers’ personal responses to a brief online questionnaire, the bank said.
There is access to low-cost, diversified exchange-traded fund portfolios that are designed by the Wells Fargo Investment Institute. These feature automated rebalancing and optional tax-loss harvesting driven by technology from SigFig, which collaborated with WFA to deliver a robust digital experience for consumers. (To see a recent article about “tax harvesting”, see here.)
Amid stories that “bigtech” houses such as Google in the US or Alibaba in China represent serious competitive threats as wealth management takes a digital turn, it is perhaps natural that a bank located near California’s renowned Silicon Valley should be among the firms developing such products and services. Recent years have seen a flurry of interest around so-called robo-advisors, which use automated systems to calculate, for example, how a portfolio should be set up after information about risk appetite and other points are fed in. A number of banks, such as UBS with its SmartWealth offering, have invested in, or developed, robo-advisory models of their own to avoid being overtaken by industry upstarts. DBS, the Singapore-headquartered bank, for example, has worked with IBM’s Watson cognitive computing team to develop new services harnessing such ideas. In the US, prominent robo-advisors include Betterment and wealthfront, to name just two. The ascent of e-commerce players such as Google and Alibaba has also prompted thoughts of how they could push into finance; Alibaba, for example, already has its own wealth management brand in China, Ant Financial.
Traditional brokerages and asset managers, already squeezed by a move towards more “passive” investment products and away from higher-cost actively managed investments, face an additional pressure from “robos”, although debate remains on whether clients will ever be happy to cut off human interaction when discussing financial affairs at the most complex and emotional level.
Cerulli Associates predicts the robo advice industry had more than $80 billion in assets by the end of 2016 and will have $385 billion in the next five years (source: Wall Street Journal, Nov 6. ).