Wealthfront Advances The Front Line Against Human Advisors

Wealthfront wants to grow from investment and planning advice to become an everything portal -- everything from paying bills to saving for an emergency fund.

CEO Andy Rachleff showed off the company's new personal financial hub at a recent technology conference.

“Our vision is to deliver a service where you direct deposit your paycheck with us,” Rachleff told the audience at CB Insights Future of Fintech conference. “We automatically pay your bills. We automatically top off your emergency fund, and then route money to whatever account is the most ideal for your particular goals, whether they’re at Wealthfront or elsewhere.”

The mechanism driving the new Wealthfront “self-driving money” initiative is Path, the company’s saving advice algorithm. The software provides myriad services to Wealthfront’s mostly younger, tech-savvy customer base, like topping off a user’s 401(k) account and providing advice on which investment accounts meet a customer’s needs best.

“We are closer to this future than you might think,” stated Harish Thiagarajan, a senior engineer at Wealthfront in a June 28 blog post on the company’s website. “We already have the GPS to route money to whatever destination is the most ideal for your particular goals.”

So, does that future include human advisors?

Revenge Of The Humans?

They may not like the answer they get.

“I recently moved my retirement account from Edward Jones to Wealthfront,” said Zach Hendrix, founder of GreenPal, which he describes as “Uber for lawn care."

“I did that primarily because my Edward Jones adviser insisted that he talk to me on the phone quarterly," he said. "Whenever he called he never really had anything special to say and it was usually just a waste of my time.”

Hendrix asked his advisor to email him with any questions or changes needed to the account. He told Hendrix that the Edward Jones system required that advisors have to talk to clients on the phone.

“I shifted over to Wealthfront for a more streamlined and automated approach to my retirement management," he said. "And now I don’t have to waste time on the phone with somebody who is just checking a box."

Advisors say machine-driven advice is inevitable, but clients will still need human advice.

“At the current rate of technological improvement, I think eventually there will come a time when artificial intelligence might supplant the majority of jobs in the world, including advisors of all disciplines,” said Christopher Kimball, a financial advisor at CK Financial Services with 25 years in the business. “What any AI application will need, however, is empathy and understanding. These qualities are vital when talking with people about personal subjects. At the moment, I haven't heard of a computer that can adequately exhibit this trait.”

Other financial professionals agree with that sentiment.

People hire investment and financial advisors to handle the subtle nuances that machines simply can't do, said James Pollard, owner of the Advisor Coach, a marketing consultancy that works specifically with financial services professionals.

“An advisor can look at your entire financial situation, combined with your goals and your preferences and put that together into a financial plan,” he said.

Most of the routine tasks have already been automated, Pollard said. And advisors are still around.

“Bill pay is automated, you can buy stocks for free through services like Robinhood, and you can even automate your savings,” he said. “All of this has happened and each time
people have screamed that it would put financial advisors out of business.”

It hasn't happened yet because advisors serve a deeper need, Pollard said.

The Demands Of Sophistication

Others, such as Casey Stubbs, founder of Finance & Markets, a trading services and training company, said many clients have more complex needs than AI can manage.

“The reality is that although Wealthfront is attempting to expand, and maybe even define the scope of what traditional investment advisors are capable of," she said. "There is a certain segment of the market that is either too wealthy, too stubborn, or too adverse to using robo-advisors to ever truly unseat them and put the profession out of business."

Although robo-investors are great for certain investors who are generally only interested in passive index funds, or have their retirements held up in company stock, they’re not sophisticated enough to satisfy wealthier investors who prefer the returns of private equity over index funds, Stubbs said.

“The bottom line is that Wealthfront will certainly capture a large share of the market who is already pre-disposed to wanting to use a robo-advisor,” Stubbs said. “As for the rest of the population, they will continue to do things that way they always have, regardless of the robo-advisor appeal.”

Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at [email protected].

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