The ascendance of the B2B robo

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6 July 2015
William Trout
Automated investment advisory is increasingly a B2B business. The trend towards a B2B model reflects the high cost of customer acquisition inherent in the direct to consumer approach, as well as the increasing seriousness with which RIAs, brokers, and other incumbents take the automated investment phenomenon. I talk about the blending of robo and real life in a past post. Basically, the B2B model has taken three forms:
  1. A build out from an existing non-discretionary platform. See Schwab’s Intelligent Portfolios and TradeKing Advisors as examples.
  2. Automation for the advisor, e.g. Upside Advisor (now part of turnkey asset management provider or TAMP Envestnet), Jemstep Advisor Pro and the institutional arms of Motif and Betterment.
  3. Partnerships, such as the alliance between Betterment and Fidelity, or the Jemstep Advisor Pro and TD Ameritrade integration.
Acquisitions have not been much of the story to date; indeed it’s worth noting that a TAMP, not an financial institution, was the first (and so far only) firm to take the robo plunge. Valuations are just too high. Nor are many institutions bold or foolish enough to build their own automated investment advisory platforms. As such, most of the B2B action has taken place around item 2 above, i.e. at the robo or vendor level. That’s about to change in a hurry. I’ll explain why in a post I'll publish next week.


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