First robots took over the world of trading, and now algorithmic eyes are focused on human financial advisors. Among the first major warehouses to submit to the trend of offering “robotic” advice options to its customers is Bank of America Merrill Lynch.
Reported robo-advisors firm at Bank of America Merrill Lynch to initially tackle accounts with under $250,000 in assets
Bloomberg is reporting the firm is developing an electronic recommendation platform which will initially target accounts under $250,000 in assets. The “robo-adviser” program, which use mathematical formulas to match investors with the appropriate portfolio, essentially doing what a human advisor does, will unveil the service next year, according to unnamed sources.
Robo-advisory services have run into resistance from human financial advisors, who see their own companies cannibalizing their fees through less expensive computer-based recommendation services. At this point Bank of America sees it as a complement not a replacement to their existing business, saying the opportunity is “for a robo-advised offering that could complement the advice and guidance offered by our financial solutions advisers,” Bank of America Merrill Lynch Spokeswoman Anne Pace told Bloomberg.
Wells Fargo views human reliance as a threat
“That is a real threat to our business, because we are disproportionately full-service, high-value-added, person-to-person activity, which isn’t for everybody,” John Shrewsberry, Wells Fargo’s chief financial officer, was quoted as saying this past June. “There’s generations of tomorrow’s investors coming up today who may be more attracted to something less person-to-person and more technologically enabled.” Wells Fargo and Morgan Stanley are the firms with the most human financial advisors.
“The robo-advice tool, which is an asset-allocation tool, is kind of taking common sense and putting it into a very user-friendly model,” Morgan Stanley Chief Executive Officer James Gorman was quoted as saying at the New York Times Dealbook conference. “If places like us don’t have that capability, we should have that capability, whether we build or buy, we should have it.”
In the United States, nearly 200 robo-advice firms are managing close to $19 billion in assets, eliminating the largest expense in most such firms – the human employee. Robo-advisors are projected to manage nearly $2.2 trillion by the year 2020, an AT Kearney report noted, pointing to the ranks of human financial advisers shrinking. Currently Merrill Lynch has 14,563 full-service advisers, each of whom deliver near $1 million in annual revenue to the firm.