Robo-Advisors Won't Dent These 4 Firms
Some robo-advisors have a good chance of becoming profitable, but Credit Suisse, UBS, Invesco, and BlackRock will be able to fend off the threat.
In 2015, positive sentiment toward robo-advisors was about at its peak with predictions of them disrupting the traditional wealth management industry. However, at that time we wrote a report titled "Hungry Robo-Advisors Are Eyeing Wealth Management Assets," taking the opposite view, stating that the economic moats of established financial institutions would keep them safe. Additionally, we opined that due to the high cost of client acquisition and low profitability of robo-advisors that many of them would go out of business or be acquired.
Our negative view on them largely played out. Currently, all signs point to the largest, standalone robo-advisors being unprofitable; multiple robo-advisors have chosen to sell themselves, likely due to their uncertain future; and the established investment service firms are still going strong. In fact, some of them have developed digital advice services in the last several years that have gathered more assets than the standalone robo-advisors that have been around for about a decade. With all that said, the pendulum of market sentiment has likely swung too far to the negative side.
Michael Wong does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.