Is the price right for Wells Fargo's robo advisor?
Wells Fargo has offered up more details on its robo advice platform, which it says is "primarily designed for next generation investors."
But it's not for every next generation investor — rather, the one who has money to invest and wants to be able to speak to an advisor too.
Dubbed the "Intuitive Investor," it’s the latest entry that demonstrates how the digital wealth management field is lining up behind the hybrid robo model, and the potential effect that will have on pricing advice.
Clients will need to pony up a minimum of $10,000 for an account with Wells Fargo's robo. The service, built and maintained by SigFig, which is also building UBS's digital advice platform, will charge 50 basis points.
Comparatively, investors with accounts at Bank of America Merrill Edge Guided Investing will only need $5,000 to get started and pay only 45 basis points.
Wells Fargo says its pricing is justified because its clients will be "leveraging world-class research and portfolio management expertise" to invest in a portfolio of ETFs.
Wealthfront, which offers research and portfolio management headlined by Burton Malkiel and an assortment of Ph.D.s from Harvard, Yale, Wharton and Stanford, has account minimums of $500 and doesn't charge for the first $10,000, with 25 basis points charged on any amount higher.
However, there's no advisor on call for clients. Wealthfront CEO Andy Rachleff recently argued that software is better at managing finances than people.
There's also no advisor to call with Schwab Intelligent Portfolios. Though clients only need $5,000 to open an account, and they don't pay any fees. Schwab's hybrid robo offering, Intelligent Advisory, has a $25,000 account minimum and annual fees of 28 basis points.
The minimums are the same for hybrid advice at Personal Capital but the price is higher — Bill Harris's platform charges 89 basis points for the first $1 million — though Personal Capital never chased young investors to begin with.
To get access to human advice with Betterment requires $100,000 and paying 40 basis points for an annual consultation, and a minimum of $250,000 and 50 basis points to have a regular conversation.
Given the options, Wells' hybrid robo is priced to compete for the mass affluent digital wealth client.
Not so much younger millennial investors, many of whom are gravitating toward micro savings and investing apps like Acorns because of very low commitment requirements and costs.
Wealth management firms are still lagging in their outreach to millennials in general, according to research firm MyPrivateBanking. “Wealth managers must break free of the notion that one strategy can target a whole generation – this is way too simplistic and ultimately will fail,” states Carmela Melone, senior analyst at the firm.
But Wells' hybrid is less about attracting new young clients and geared rather at retaining the wealth management base the firm already has, particularly the children of long-standing clients, says Celent analyst Will Trout.
"The goal here, like with Merrill Edge Guided Investing, is to provide graduated service, not to disrupt existing revenue streams," Trout says. "Wells doesn't want to make money from this necessarily; it's more about creating a consistent advice delivery regardless of channel.
"At the end of the day, I'd say it's a defensive play," Trout adds, "to protect margins and rationalize delivery by lowering costs."