28 January 2022 |

All Eyes on the Future of Robo Advice 👀


TL;DR: UBS is acquiring robo-advisor Wealthfront in an all-cash transaction worth $1.4 billion.

The exit isn’t bad. In fact, it’s good for Wealthfront. But it does place a ? on the future of fintech disruptors to challenge Wall Street instead of becoming a part of it. 

What will keep other large independent robo-advisors strong enough to stand alone is their ability to incorporate human advice while diversifying into additional financial verticals, like retirement plans.

Why it Matters

UBS realized the majority of people on earth do not have $500k to invest and they need to cater to the Millennial and Gen Z investors who are increasingly taking a greater share of the world’s wealth (that $68 trillion generational wealth transfer). 

On the other hand, Wealthfront realized its headstrong “anti-human advice” biz model and fees didn’t mix well. It was just too difficult to be profitable off 25 basis points when customer acquisition costs are so high. Plus, people want human professional financial advice. Period. 

It’s like my friend Anders JonesCEO & Co-Founder of Facet Wealth said: 

“What this should tell everyone is that the future of advice is human. Certified Financial Planners will need modern, future-ready tech in order to serve and continually guide their clients through every moment of their financial lives. A robo advisor simply can’t do that.”

Who’s Next?

Wealthfront’s sale — preceded by Personal Capital’s $1 billion sale to Empower Financial in 2020 — leaves Betterment among stand-alone robo-advisors.

Plus, there are headlines saying the future of fintech companies is at stake. Now, folks are looking at Betterment as the next robo-advisor to get gobbled up. 

I agree that any new robo-advisors that try to enter the market won’t make the cut. But Betterment got in early (2008), achieved scale, and built a successful brand.

Plus the fintech has an edge: 

  1. A fresh leader at the helm with Sarah Levy, who comes into fintech after scaling brands like Nickelodeon with expertise in high growth operations, marketing, and brand building. 
  2. A massive push into B2B. Betterment’s CEO has made it very clear that Betterment for Business, 401(k) offerings, and Betterment for Advisors are the future of its platform. 

And Betterment’s growth has gone through the roof with $33 billion in assets under management and more than 700,000 clients.

Expanding into other areas while working toward the hybrid human + automated financial advice gives the robos more opportunity to scale their business instead of just relying on robo-advice as their bread and butter. 

Will it be hard to compete? Yes. But I’m optimistic that Betterment will stay independent (and exit through an IPO) and the future plans of fintech to cultivate change in the financial system are still, very much, intact.

Check out my interview with Sarah Levy explaining how she sees Betterment going public in the future as one of the most enduring financial services brands for the next generation.

YouTube video