Capital One Rolls Out a Bank Built Robo
17 June 2016
In a blog post yesterday I took automated advisors to task for the black and white way (advisor-assisted “hybrid” model versus “digital only”) they have framed the robo debate. Imagine my surprise when I saw that Capital One’s brokerage arm had launched a platform addressing this very complaint.
The Capital One robo combines a digital interface with telephone access to advisors. It’s an advanced take on the hybrid models offered by Personal Capital and Vanguard, both of which use digital technology (iPads, smartphones and other interfaces) to enhance and scale the contribution of the individual advisor.
What these models do not do is digitize advice delivery. Yes, they deploy algorithms to develop risk based portfolios, but firms have been doing this for ages. The defining characteristic of robo (as opposed to automated) advice is the removal of the real life advisor.
Robot with Benefits
The Capital One robo or robot is a step in that direction in that it automates the entire portfolio manufacturing process, while giving investors the options of getting a wise uncle (or aunt) on the phone to discuss it. This process spans risk profiling and portfolio construction on the front end to compliance and funding at the back.
Needless to say, clients pay for the privilege, to the tune of 90 basis points. This is not much less than the average US advisor charges for his services, and it is a given that other firms will replicate this model, and at half the price. In the meantime, give Capital One kudos for being the first US based bank (Bank of Montreal, whom I discuss in a recent report, was the first in North America) to roll out a homegrown, pure play robo advisory platform.