The two largest robo-advisor startups, Betterment and Wealthfront, were once battling for the same millenial market, but in recent years they have diverged and now serve very different purposes, InvestmentNews writes.
Digital and Then Some Vs. Digital-Only
Betterment has moved away from a purely digital platform, attempting to entice wealthier clients with a team of human advisors, according to the publication. Additionally, the firm has launched Betterment for Advisors to promote the platform to independent registered investment advisors, and is selling retirement plans through Betterment for Business, InvestmentNews writes.
In a blog post, Betterment founder and CEO Jon Stein tried to alleviate RIAs’ fear of robos, saying that financial services can benefit from modern technology but still require a human touch, such as using a clients' motivations, needs and goals to make recommendations, the publication writes. Furthermore, Stein hinted that soon advisors could be able to use Betterment for cash flow purposes such as mortgages and credit, according to InvestmentNews. Interestingly, by moving into these areas, Betterment has put itself in competition with traditional wealth management firms, the publication writes.
Wealthfront, on the other hand, has chosen to remain completely digital, targeting mass affluent millennials to help them save for retirement, InvestmentNews writes. The company’s co-founders, Andy Rachleff and Dan Carroll, doubled down on their belief in automation, saying in a recent blog post that “the current system does not adequately encourage [most Americans] to save what is required," InvestmentNews writes.
They go on to say that automation can make a “major dent” in the savings gap and that using Path, their automated financial advice engine, resulted in an increased savings rate of 28% — which, for their target customers, is an additional $1.25 million in retirement, the publication writes.
