Robo Advisor News – 2020 Spring Edition with Vanguard and Robo AUM Stats

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Latest Robo-Advisor News

Since the COVID-19 pandemic began, all aspects of our lives have changed. In addition to worrying about our health, we have also had to wonder about the fate of our investments. The latest robo-advisor news illustrate that Americans continue to believe in the power of investing.

Many of you may be wondering: how are robo-advisors performing during this pandemic?

In March, the U.S. stock market dropped substantially as states and countries entered various levels of lockdown procedures. While the market has trended up over the last few weeks, it is likely that we will see continued unpredictability for the foreseeable future. Recent robo-advisor news reflects this trend; the latest reports show both good and bad news, with some robos showing negative effects, whereas others are still flourishing.

How are Robo-Advisors Performing During COVID-19?

Both Betterment and Wealthfront reported positive changes in their accounts and clients since COVID-19 hit. According to Ryan Neal at Investment News, Betterment clients tended toward “dip buying” and Wealthfront saw an increase in investment account openings. These trends indicate that investors are remaining proactive despite market volatility.

New Robo-Advisors Join the Market

Vanguard has introduced a new pilot program to the robo-advisor marketplace: Vanguard Digital Advisor. While this may be bad news for independently run robo-advisors, Vanguard’s new offering will be beneficial to clients looking for digital investment services backed by a big-name institution.

Vanguard Digital Advisor requires a $3,000 minimum investment and charges 0.20% AUM in advisory fees; however, they credit account holders any revenues Vanguard receives from portfolio securities. They claim this will bring clients closer to a 0.15% AUM fee, bringing this robo-advisor in line with many of the cheaper robos out there.

Citi joins Vanguard with a new robo-advisor offering, announced earlier this year. Citi Wealth Builder requires a minimum investment of $1,500 and charges an advisory fee of 0.55% AUM. Existing Citi Bank customers may have these fees waived on initial portfolios depending on the Citi accounts they have.

Socially Responsible Investors: Take Note!

Newday, a sustainable, impact-investing robo-advisor has recently expanded its offerings. In addition to adding four socially responsible portfolios to their offerings, Newday is also making a positive impact on the planet by planning on adding competitive checking and savings accounts, supported by financial institutions that do not lend money to fossil fuel companies. These accounts will come with biodegradable debit cards, making your impact on the planet even more positive.

Robo-Advisor Closures

Unfortunately, Motif is closing. Folio Investing will take over management of Motif customer accounts effective May 20, 2020.

Folio will use the same style of ready-made portfolios that Motif clients have enjoyed. Motif clients who are transferred to Folio can expect to pay $19.95 per month for the services.

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Robo-Advisor Latest News from Motif, Vanguard, Citi and Newday

“Motif, Thematic Brokerage Platform, to Close” by Samuel Steinberger at Wealth Management

“Motif, a brokerage platform that offered investors portfolios of stocks around business themes, is closing, according to a letter from the firm’s co-founder and CEO, Hardeep Walia, provided to users on Friday and shared with WealthManagement.com. Client assets held by the company will be transferred to Folio Investing on May 20.

Motif was founded in 2012 with the idea that users could create their own baskets of stocks around themes and share them with others. It worked to expand its initial thematic trading feature into something more recognizable to today’s robo advisor services…..”

“Will Vanguard’s New Robo Squeeze Out Smaller Players?” by Sean Allocca and Suleman Din at Financial Planning

“Vanguard’s planned low-cost robo advisor could represent one of the greatest threats to the independents that spawned the automated advice movement in the first place.

Branding robo advice with the Vanguard name and offering it at an all-in-cost of 20 basis points could squeeze a fledgling industry already struggling with customer acquisition costs, industry experts say. Additionally, it furthers the industry-held concern that advice in the digital realm is a commodity.

Vanguard has already demonstrated its digital advice prowess with Vanguard Personal Advisor, a hybrid platform that quickly surged to over $100 billion in assets, still the largest digital platform AUM in the market to date. A direct-to-consumer pure robo offering with $3,000 account minimums from Vanguard, some suggest, could spell real trouble for independent robos, which have long been dogged by predictions of extinction….”

“How Robo-Advisers Performed During Coronavirus Sell-Off” by Ryan Neal at Investment News

“Digital advice platforms have dealt with market volatility before, but nothing quite like the recent activity driven by fears of the spreading coronavirus.

The final week of February brought about the market’s worst performance in over a decade, before robo-advisers even existed. So how did they do?

The good news is the two most popular start-ups, Betterment and Wealthfront, stayed online, which is more than can be said for some of the popular online brokerage platforms for do-it-yourself investors. Both services had crashed in February 2018, when the S&P 500 Index sank 4.1%…..”

“Citi Rolls Out Robo-Advisor with $1,500 Minimum” by Alex Padalka at Financial Advisor IQ

“Citi has unveiled a new digital investment platform with low account minimums and no advisory fees for some customers.

The company’s new robo-advisor, dubbed Citi Wealth Builder, is a collaboration with Jemstep, a subsidiary of Invesco, according to a press release from Citi. The platform is available to clients with an initial investment of $1,500 or more and charges a 0.55% advisory fee, the company says. The fee is waived for the “initial portfolio” for Citi Priority and Citigold clients, according to the press release…..”

“Newday Impact-Investing Robo Adds Strategies Through New Partnerships” by Bernice Napach at ThinkAdvisor

“Newday now has 12 equity portfolios — all concentrated separately managed accounts — plus a bond ETF and bond mutual fund, which are available to investors with just $100, for a 75 basis-point fee. Like other robos, Newday will allocate an investor’s assets based on their risk tolerance and personal values, but investors can override those choices. It uses fractional shares to divvy up an investor’s deposit among the different strategies chosen.

A checking and savings account, with competitive rates from a banking institution that doesn’t lend to arms manufacturers or fossil fuel companies, is planned for the second quarter, along with a biodegradable debit card…..”

“Robo-Advisors with the Most Assets Under Management—2020” by Barbara Friedberg at Robo-Advisor Pros

“In the financial advisory world, assets under management, or AUM, is a key metric. Most advisors, both traditional and robo-advisors, earn their income as a percentage of AUM. The greater the amount of assets under management, the more income for the company.”

“As robo-advisors continue to grow in popularity, it’s interesting to track the growth of robo advisors’ AUM. It is no surprise that the largest robo-advisor AUM growth is concentrated in Vanguard and Schwab’s robos, two large investment brokerage houses with ample existing clients under roof. The Vanguard AUM clearly trumps Charles Schwab’s AUM, although both firms are substantially ahead of the stand-alone robos.

The 3rd through 5th places go to the oldest stand-alone robo-advisors: Betterment, Wealthfront and Personal Capital. The largest stand-alone robo-advisors are also the oldest. While Wealthfront and Betterments assets under management are running neck-in-neck in the robo-advisor AUM competition…..”

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