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Hype Over Robo Deals Leaves Advisors Underwhelmed

By Thomas Coyle November 4, 2014

Jostling for “robo” supremacy among RIA custodians got intense last month, but it remains unclear what independent advisors really want or expect from these newfangled providers.

In recent news, Fidelity Investments struck first, saying it would provide RIAs access to Betterment’s robo suite for clients who want self-directed financial planning and low-cost investing. Then TD Ameritrade elbowed in with word it plans to help advisors use several robo providers in serving retail clients. Finally, Schwab announced (again) that its still unlaunched robo platform will be for RIAs as well as do-it-yourselfers.

Whether these developments mark robo advisors’ entrée into mainstream financial planning or herald their eventual demise through acquisition is a matter of broad debate. The more practical question of how advisors think they’ll benefit from these online providers, however, gets less attention. With this in mind, we reached out to advisors affected, potentially anyway, by Fidelity’s tie-in with Betterment.

Tim Utecht — president of Life Planning Partners, an RIA in Jacksonville, Fla., that counts Fidelity as its primary custodian — doesn’t want much from a robo. “We don’t really see it as a fit,” he says of Betterment’s institutional platform. “We have a holistic practice for clients with very complex lives.”

Tim Utecht

This stance makes sense to Bill Butterfield, an analyst in consulting firm Aite Group’s wealth-management segment. “These platforms are still emerging and in my opinion offer pretty basic functionality.”

But then Fidelity hasn’t exactly overwhelmed Utecht, whose firm manages $90 million, with ideas for using robo tech to enhance his practice. “They’ve never mentioned it to us,” he says.

Fidelity has been more communicative with Global Financial Private Capital, a custody client in Sarasota, Fla., that manages $4.5 billion. Though Betterment’s Fidelity-sponsored platform has yet to come online, the RIA’s president, Geoffrey Frazier, says Fidelity has told him it’s “putting together the details” on how his firm may use the new technology.

Lacking more definite guidance from Fidelity, Frazier hopes robo capabilities can help his firm on several fronts. First, he thinks it could be a way to “relate to someone with a 401(k).” That is, robo advisors’ interfaces are similar to those of 401(k)-administrator platforms, so RIAs with robo-service options could be more attractive to veteran defined contributors who are contemplating retirement and rolling over substantial 401(k)s.

Next, Frazier thinks robos can give clients a self-directed option. Traditionally, if clients wanted to make a side bet with their pin money, advisors have sent them to a do-it-yourself discount broker. A robo under the firm’s purview would keep any such investments clearly in the advisor’s sight.

Finally, Frazier feels robo capabilities could help his firm capture assets from children and other lower-asset relatives of valued clients.

Down the Road

For Butterfield, the ability to serve “clients with less complex needs and lower account balances” without giving short shrift to “clients that have more complex planning and investment-management needs” is the main thing robos have to offer brick-and-mortar advisors.

Dylan Bond agrees. The head of Bond Financial Services, a practice in Longmeadow, Mass., that manages $100 million and works with Fidelity, sees them as a gateway to younger clients, especially those more at ease online than with real-life advisors. “But as they get older and need more help, that’s where I come in,” he says.

Frazier of Global Financial Private Capital also sees robo advice as a cost- and energy-efficient means to nurture relationships that could become more valuable over time. In time, however, he sees robo technology underpinning whole-family wealth management. “Down the road,” he says, “we could get into the real householding” — which hinges on comprehensive oversight of investments “across related households.”