‘Robo-Advisors’ Pose Challenges for Traditional RIAs

Terry Flanagan

Although so-called robo-advisors comprise only a fraction of overall wealth management assets, the online portfolio managers are on an upward trajectory which presents challenges and opportunities for traditional registered investment advisors.

Vanare, a wealth management technology company, has picked up on this theme by acquiring NestEgg Wealth, a robo-advisor, and integrating its suite of services. The idea is to enable RIAs to combine traditional high-touch services with an automated channel.

Rich Cancro, Vanare

Rich Cancro,

“Now, on one platform, one technology stack, one set of workflows, RIAs have an online channel to attract prospects and empower their clients to have a more dynamic interaction” Rich Cancro, co-founder and CEO of Vanare, told Markets Media. “This is an important way to help an advisor differentiate themselves by having a much more powerful experience for the client online, as well as bringing more clients and prospects to their website.”

Global assets under management of robo-advisors will grow from $14 billion today to an estimated $255 billion within five years, according to MyPrivateBanking Research.

NestEgg’s mission is “delivering sophisticated and customized investment advice to people who have any amount of assets,” said Alexey Sokolin, chief operating officer of Vanare and former CEO of NestEgg Wealth. “Our mission is to find a way to provide highly actionable, intuitive, easy to use advice that people can implement. The very best way to do that is through the RIA channel.”

The acquisition of NestEgg is a logical next step for Vanare, whose technology platform integrates Online Wealth Management, CRM and Portfolio Management, and is designed to empower advisors to aggregate assets through traditional face-to-face advice and digital, low-touch interaction.

“Regardless of the channel, whether it’s online or traditional, it’s a common underlying technology and workflow,” said Cancro, a former managing director at Bank of America Merrill Lynch, where he was responsible for its Global Wealth and Investment Management Managed Account Technology Platform. “This offering is fundamentally different than any other platform in the business right now, and is strongly resonating with the industry.”

As their baby boomer clients prepare for inter-generational wealth transfers, RIAs—many of whom are baby boomers themselves—are seeking to scale their business using the latest technology. Many get a fair amount of traffic to their website.

RIAs are “starting to look like their clients,” said Cancro. “There’s a transition happening in the advisor industry where Gen Y are now becoming advisors. The traditional business is still very sizable, but this generation wants to be able to engage with clients through technology and monetize online traffic.”

Added Sokolin, “Our role is to partner with the financial advisor industry and support them in the transition to the new business model, one that is a combination of human service and technology enabled service. In 2015 we’ll see much more advisors going to work with companies like ours to find a model that serves both the 65-year-old client and then their kids in a way that makes sense for inter-generational transfer.”

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