Mia Diamond

2 Dumb Questions:  Does RIABIZ have any business (adverting etc.) relationships with any of the companies/people you tout on this 'list'?  #2- Will RIABIZ disclose that?  1 Dumb observation- transparency is important particularly now

Brooke, This piece seems more “Love” than Tough.”  Hopefully, the next parts of the series will be more characteristic of your hard edge reporting style.

This story fails to mention the following:  That half of FE’s managed account business is-sub advised which means the relationship is owned by the likes of Vanguard, Voya and Empower who are unlikely to allow FE to market their Personal Advisor service and risk cannibalizing their own offerings.

Also, FE’s current managed account business has a 80% annual retention rate which doesn't bode well for up-selling these users to the more expensive Personal Advisor product.

The Mutual Fund Store acquisition  is essentially a “Hail Mary” for FE.  Its 401(k) business selling to large employers has plateaued and this move essentially pivots the company further away from its technology roots to more or a brick and mortar play emphasizing people more than product.

Lastly, robo-advisor competitors like blooom are making big gains. Blooom essentially does the same thing as FE but doesn't have the overhead of having to integrate with 401(k) recordkeepers and selling to employers.  It sells directly to individual 401(k) participants and has quickly attained almost $1B in AUM.

FAA-no ads from mutual fund store or financial engines! At least in the 2+ years I have worked here.

Power Player: Larry Raffone is racing to 'lock up' the 401(k) market by taking its robo head start and combining it with a semi-national RIA

Financial Engines

The Mutual Fund Store

Raymond Sims

Robert Napoli

William Blair

John Bunch

Christopher Jones

Larry Raffone

The days when RIAs were the outsiders at the 401(k) party are fast coming to a close. What's new is that the mass of 401(k) assets 
is getting critical at about $3 trillion; fiduciary advisors are getting appreciated; fat fees and questionable kickbacks are getting exposed and stepping out of line is getting dicier as the Department of Labor tightens the regulatory screws.

The old reasons why the 401(k) business is attractive are still in place: there are fresh assets pouring in every month and when employees leave jobs or retire, they produce rollovers that build up IRA accounts for financial advisors. The drawbacks of getting into the 401(k) business are still in place, too. Dealing with retirement assets is really a second line of business and it remains -- unless you overcharge with hidden fees -- a low margin business with high potential fiduciary liabilities.

Still, the outsourcers, infrastructure and accumulated knowledge for RIAs to capitalize on is growing daily and a the mega-shift of assets away from brokers is making the 401(k) business riskier and riskier -- to ignore.

401(k) Stories

Stripped down to its essentials, financial advice is a fairly straightforward proposition. Done well, a highly ethical individual stewards the assets and actions of an investor in a personal and professional interchange.
 
But now a vibrant new class of entrepreneurs is staking their fates and their fortunes on the premise that financial advice can be delivered in a better, cheaper, easier, more ethical, more transparent manner and, as a bonus, in a way more devoid of human annoyance on both ends of the transaction.
 
Cue the robo-advisors, arguably a callous misnomer for automated asset management. 
 
The prototypical robo-advisory entrepreneur has more brands on his or her resume than NASCAR. The bona fides of these industry upstarts often include Ivy-level colleges and MBA programs at Harvard or Stanford. They are often flush with IPO dollars realized at concerns like LinkedIn, Facebook, eBay, Amazon  and Microsoft. 
 
Robo-folk believe that technology is not an enabler of advice but rather, if engineered correctly, advice itself in digital form. 
 
And, they believe the best solutions originate in Silicon Valley or academia, not Wall Street. Robo-entrepreneurs are white-boarding the whole business model, culture and technology from scratch in the conviction that little can be learned from a legacy advice system still rooted in an investment banking culture acting under the core premise that if stockbrokers get rich some of the good effects will trickle down to clients – with the clients none the wiser. 
 
Robo-advisors are a scintillating topic for students of the advice game as they grow by hundreds of millions in assets every month, constantly evolve their business models and receive cash infusions from ever-larger swaths of venture capitals.
 
Throw in the fact that robo-advisors have yet to see a dime in profits -- and won’t in the foreseeable future -- and you have real intrigue. 
 
RIABiz has avidly covered the fast-evolving robo-advice phenomenon and will continue to do so. We present the growing body of articles here.

Robo-Advisors

One analyst calls Financial Engines' Personal Advisor a 'massive long-term opportunity' but the rollout is slow and details are scant

Power Player: Larry Raffone is racing to 'lock up' the 401(k) market by taking its robo head start and combining it with a semi-national RIA

Related Moves

July 11, 2019 at 4:26 AM

November 20, 2019 at 10:19 PM

FAA

Frank Underwood

Graham Thomas

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