Robo 3.0: The Rise of the Asset Managers and the Robo Advisor Response

by William Trout, February 22, 2016
Industry Trends
EMEA, North America


Fees for advice on investments and financial planning have always been the prerogative of the advisor. Asset managers now seek to take their share.

In the report Robo 3.0: The Rise of the Asset Managers and the Robo Advisor Response, Celent outlines the evolution of the automated investments business, from the emergence of Wealthfront and Betterment (Robo 1.0) post-crisis to the entrance of Schwab and Vanguard, and most recently, pure play asset managers BlackRock and Invesco (Robo 2.0). The report examines the strategic motivations of these asset managers and the degree to which they can capture the momentum created by the first generation of robo advisors.

First movers like Betterment and Wealthfront may live to enter the investment management mainstream, but other robo advisors will find their visions coopted and sell, leaving their dreams of disruption to a future generation of startups. This generation will set fright to complacent incumbents by harnessing technology that is still in its infancy to their own robo visions. Indeed, the founders of the digital advice firms that will truly upend current wealth management hierarchies are likely still in high school.

In the meantime, a cadre of new robo advisors is using passive ETFs, the signature product of the robo advisor, to take positions against the market. This use of active strategies is a first step to the introduction of more sophisticated and scalable robo advisory offerings (Robo 3.0). Such offerings will bind financial planning more closely to investments advice and deliver levels of customization comparable to that offered by the most elite managed account programs today. Wirehouses and other large wealth management firms then will find that taking shelter upmarket is no longer an option.

“The implications for the competitive landscape are huge,” says William Trout, a senior analyst with Celent’s Securities & Investments practice and author of the report. “Retail wealth management firms must now reckon with threats from both buy side firms and new startups.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Executive Summary



Key Research Questions





The State of Robo 2.0


Industry at a Crossroads



The Case of Merrill Lynch



Whither the Advisor?


Ecosystem and Actors



The Registered Investment Advisor



The Opportunity for Banks



The Pinching of Online Brokerage



Enter the Asset Managers


Looking to the Future: What Is Robo 3.0?



Product Depth





Looking Ahead


Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


Related Celent Research


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