Robos Prevent Fee Compression (And Don’t Cause It) – ValueWalk Premium
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Robos Prevent Fee Compression (And Don’t Cause It)

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Roboadvisors don’t cause fee compression; when used correctly by advisors, they are the solution.

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Q2 hedge fund letters, conference, scoops etc

Fee Compression

Meditations / Pixabay

This really was disruption

The word “disruption” is on my list for my next cliché rant. Most companies that claim to be so-called “disruptors” are in fact just early stage adopters of a technology that somebody else thought up.

Betterment (shout out to Jon Stein) broke through with a direct-to-consumer model which was quickly replicated by the Fintech community (most of those firms have been gobbled up by larger financial institutions by now), to which the Schwabs and TD Ameritades of the world said, “not by the hair of my chinny chin chin” and responded by building their own versions.

So where are we in the technology lifecycle of roboadvisors? I’d say we’re still in the early adoption stage. The average person, or even the average private wealth financial institution, hasn’t adopted roboadvisors.

But doesn’t mean they don’t have utility for advisors who want to scale their businesses.

Until recession do us part

Before I go on, let me acknowledge as I’ve said before that roboadvisors haven’t really been tested yet. Those of us who went through 2008 appreciate this view. When the recession hits and robo clients find their portfolios crashing down by 30% and nobody to advise them to resist the urge to sell at the worst possible time, they’ll appreciate the value of human investment advice over staring at red numbers on a computer screen.

By the way, some robos aren’t straight robos anymore. We should start calling them “The Artist Formerly Known as Roboadvisor.” For a higher price, you get access to a team of CFPs available to speak once a quarter or something like that.


I have to wonder if this sounds better than it truly is. You’re telling me someone who doesn’t really have a clue who I am as an emotional being is going to render advice in 20 minutes over the phone that is going to save me and my kids from eating Alpo?

There no way to know until we go through another systematic failure of the banking system. Who’s game?

Tweet me if you’re up for going through that one more time.

Robos have yet to be tested and when the recession does come I envision consolidation. There aren’t going to be dozens of these things that survive in perpetuity –just one or two. For now, no recession in site, robos are still alive, and the industry is scapegoating them for fee compression.

Read the full article here by Sara Grillo, Advisor Perspectives


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