Boston, November 8, 2016 –The Department of Labor fiduciary rule is putting the pressure on financial institutions to segment their client base by drawing tighter compensation ranges around certain sizes of client accounts. Many believe robo-advisors—digital wealth platforms with standard allocation models, automated implementation, low prices, and low minimums—are an ideal destination for the small accounts that firms/advisors may need to let go of based on the economics. Robo-advisors offer an opportunity to hold onto the client account, which may experience future growth and return to the more upscale product solutions that come with personalized advisor support. “Robo-advisors offer a more sensitive option than terminating relationships with small accounts,” says Aite Group senior analyst Denise Valentine. However, there are a few challenges with the robo-advisor solution. The platforms lack the full array of products. For example, these platforms do not include insurance products or specialty products, such as the structure for a college education savings plan known as a 529 plan. Robo-advisors also do not generally support multiple goals or provide financial guidance, such as paying down debt or deciding on a Roth IRA. The platforms currently may not even include a holistic view of all holdings. “Robo-advisor plans fall under the fiduciary level-fee scenario. However, DOL guidance made clear this would not hold true for firms offering only proprietary products,” concludes Denise Valentine. Press Contact: Jennifer Molgano +1.617.338.6050PR@aitegroup.com About Aite Group: Aite Group is a global research and advisory firm delivering comprehensive, actionable advice on business, technology, and regulatory issues and their impact on the financial services industry. With expertise in banking, payments, insurance, wealth management, and the capital markets, we guide financial institutions, technology providers, and consulting firms worldwide. We partner with our clients, revealing their blind spots and delivering insights to make their businesses smarter and stronger. Visit us on the web and connect with us on Twitter and LinkedIn.
Robo-advisers are perceived to be an ideal solution for small accounts that financial firms and advisors wish to keep, but there are certain issues created using the robo-adviser solution, according to Aite Group senior analyst Denise Valentine. The first issue is how much money a customer can afford to put into the robo-adviser. The robo-advisers do not generally provide multiple goal support or financial guidance.