Are Traditional Providers Finally Taking the Robos Seriously?
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A recent article in the trade press about RIAs creating (and even seeking to white label) their own “robo” platforms underscored concerns I’ve had about around the automated investments business for some time. I see three major headwinds facing the automated advisors, particularly those primarily serving investors directly (my editorial commentary in italics).
- Costs of customer acquisition are high. At what point are the venture capital backers going to want their more half billion dollars back?
- Revenue models are low.It’s hard to make money when you are charging less than 25 bps on assets.
- Barriers to entry are few. Combine the ability to code and decent investments savvy and you have got the skeleton of a robo. Then it’s off the see the deep pocketed panjandrums of Silicon Valley.