As CEOs, the pulse of industry events often requires more attention from us than we may admit. And whether those events pose an opportunity or a threat, they are certainly a time for us to take stock of what is before us.
For me, one of those occasions happened in early 2015 when robo advisor Wealthfront declared they were going to make financial advisors obsolete.
At that point, Riskalyze had just a few thousand users. To hear another firm say that the financial advisors we were passionate about serving were going to go the way of the dodo struck me as profoundly wrong in a world that needed more access to human financial advice, not less.
Even though Wealthfront started softening its words within weeks of that original declaration, it kind of stuck in my craw, and then I found myself at one of our industry conferences with a video camera and microphone thrust in my face.
What did I think of Wealthfront, the columnist asked?
“Wealthfront is just E-Trade with an expensive coat of paint,” I responded, somewhat impulsively.
Within an hour of that video going live, I had been blocked on Twitter by Wealthfront’s then-CEO, Adam Nash (a guy I actually kind of liked from his blogging about prior career experience at LinkedIn).
'Can’t out-robo the robos’
What fascinated me is how advisors kept thinking Adam was their new competitor when the truth was that Wealthfront wasn’t even close to capable of competing with the value proposition a great financial advisor brings to the table.
I got that off my chest a few weeks later speaking to a packed hall of advisors at a conference.
“You cannot out-robo the robos,” I said. “In the race to depersonalize your services, you will lose. Riskalyze believes in empowering advisors with great technology that lets you level the playing field and differentiate based on your unique strengths: a name, a face and a connection with your clients. That’s the way advisors win and democratize access to their advice.”
At the time, some people told me I was a bit brash for speaking so plainly about Wealthfront. But it doesn’t take spending much time with great advisors to understand the trust they build, the credibility they bring and the value they provide.
‘Client acquisition machine’
So it was quite the day for me a few weeks ago when Wealthfront, under new CEO David Fortunato, announced it was selling to UBS.
In doing so, it will become a small division of one of the oldest and most storied banks in the world, one whose powerful wealth management business is home to thousands of — human — financial advisors.
From my chair, Wealthfront now looks like a client acquisition machine for UBS’s wealth management business, with UBS set to use Wealthfront as a profitable way to develop and build relationships with early-stage investors in the hopes of converting many of them to UBS financial advice when they reach scale. It’s a fine strategy and gives UBS an answer to similar offerings from JPMorgan Chase, Bank of America, Charles Schwab, Fidelity and others.
But ultimately, the deal represents a $1.6 billion dollar vote of confidence in the value of human advice. And that bodes well for every financial advisor in our profession — from those at the wirehouses and national/regional firms, to those affiliated with independent or insurance broker-dealers, to boutique independents, all the way to the scaling enterprise RIAs.
Winning bet
It’s also a cautionary tale for those who want to innovate at the intersection of clients and advice. When something is deeply complex and critically important, we want to work with a human that we can trust. I wouldn’t pick a robo brain surgeon, either.
Technology is at its best when it is empowering, not attempting to replace, our humanity. What is great about Zoom calls is the human communication that flows over them, not the bits and bytes that do the work. That’s why we’ve always believed great advisor technology fades into the background to let the brilliance of the advisor’s work shine through.
Advisors will be replaced by algorithms the same day that they replace therapists, counselors, coaches, teachers and friends. Let’s just say that day is a long, long way away.
I’m very proud of the bet we placed on financial advisors a decade ago. Late last year, we doubled down on that bet by recapitalizing our firm instead of selling. And a decade from now, I look forward to celebrating the impact our profession is making on the world yet again.
