Even in advertising, digital advisors face an uphill battle

Born out of the financial crisis, digital-first independents have cultivated messaging that presented them as modern and more transparent alternatives to Wall Street.

They’re now increasingly taking that tack to mainstream advertising, as incumbents have managed to either match or pull ahead on pricing, features and assets under management.

Independents say such messaging is one of levers they still can pull in their favor as they fight for client awareness and assets, even though they acknowledge incumbents’ ad budgets are much larger.

“We’re never going to outspend the Vanguards or the Schwabs,” says Porter Gale, Personal Capital’s chief marketing officer. “We just have to be smarter and more creative.”

Personal Capital recently launched a new marketing campaign, aimed at reshaping the firm’s image, across a range of media, including print, television, online and social media. The national campaign, along with focused strategies in Seattle and Denver, includes ads in magazines like The Economist and The New Yorker and emphasizes the firm’s access to human advisors.

BART NAGEL/Personal Capital

The campaign is an attempt to take on some of the larger incumbents that have entered the marketplace in recent years — and taken on significant assets in the process. Vanguard’s Personal Advisor Services and Schwab’s Intelligent Portfolios, for example, have amassed $115 billion and $34 billion in assets, respectively, and also offer access to human advisors.

“Yes, we’re challenging the legacy players in wealth management,” Gale says. “The research showed that we are perceived as just the tools and technology. What is not getting recognized is that we have really amazing advisors as well.”

Personal Capital reached the $10 billion milestone in July — adding $2 billion in assets since the beginning of the year.

The launch came after a fresh injection of $50 million in capital in February, which was when the firm first hired Gale, who was the former vice president of marketing at Virgin America. The Redwood Shores, California-based firm also announced Fidelity Investment’s former CMO, James Burton, will join its executive ranks.

“The ultimate goal is to become a household name,” Gale says. “Other players are trying to bring tools to the marketplace. We’ve been doing it for over 10 years.”

Breaking through in advertising will be a challenge though. For comparison, Fisher Investments — which took criticism this month for remarks its founder Ken Fisher made at an industry conference — is well known for its exuberant spend on marketing. Fisher has said the company spends around 6% of revenue on marketing, more than triple the industry average.

The Personal Capital TV spots have had 775 national airings since September, according to iSpot.tv, a website that tracks television commercial metrics. The total estimated spend on the placement of the ads was approximately $211,150. A recent Fisher Investments ad cost an estimated $45 million over almost 14,000 airings over a four-year span, according to iSpot.tv data.

That’s almost equivalent to Personal Capital’s $50 million capital raise earlier this year.

Marketing is one of the largest spends for wealth management firms, according to a 2019 survey by Broadridge. Out of the 406 advisory firms surveyed, the plurality planned to spend more on social media (19%), in webinars (14%) and in digital media advertising (13%). Almost one in 10 advisors planned to hire new in-house marketing staff.

“Branding and marketing is extremely critical in growing market share in the investment advice business,” says Bill Winterberg, founder of the fintech blog FPPad. “The challenge for Personal Capital is that even after 10 years of being in business, the company's brand awareness is significantly smaller than the industry incumbents.”

In a similar move, earlier this year Betterment launched a national ad campaign headlined by TV spots featuring Maggie Siff, actress on the hit Showtime series Billions, that aired in prominent spots during the U.S. Open tennis championship. Betterment did not comment on the cost of the campaign at the time.

Marketing has been the Achilles’ heel for most digital wealth managers, says Will Trout, a senior analyst for Celent. Firms can spend on TV and print ads, and on social media impressions, he says, but eventually all businesses need to show a pathway to profitability.

“The new branding and marketing is attractive, but won’t move the needle in itself,” says Trout. “The economics of the stand-alone robo model in whatever form are just too tough.”

Personal Capital does have one of the most popular affiliate marketing programs among financial services firms, according to a number of current and former industry bloggers. The program taps paid bloggers to direct prospective clients to free financial tools on the firm’s website. Personal Capital then hopes to upsell those customers with premium services.

Wealthfront was among the first of two robos to settle an enforcement action with the SEC in part for failing to fully disclose that it paid for referrals.

However, Personal Capital may be able to differentiate itself from competitors without utilizing digital marketing campaigns, Winterberg says. Specifically, the digital hybrid advisor has more options to allocate customer portfolio holdings than other incumbents, and offers a more modern, digital experience to clients.

To keep up with the crowded digital advice space, Personal Capital launched a high-yield savings account and a tool for savings and planning in June. Robos like Betterment and Wealthfront have looked to high-yield accounts to draw in cash — though recent Fed rate cuts have upped pressure on firms to cut yields they had been touting to consumers.

In addition, the hybrid digital advisor also launched a tool designed to guide clients’ financial choices and aggregate client accounts. The software connects directly to clients’ bank accounts, including Personal Capital Cash, and is free to all consumers on the firm’s website.

Personal Capital now has more than 2 million users who hold over $41 billion in cash or money market accounts on its platform and over 150 advisors who manage those accounts, according to the firm.

After a decade in the digital advice space, Personal Capital will need to commit to reinventing itself, Gale says.

“It's essential to demonstrate that we know the importance of the 'personal' in our name and that we're here to help.”