“Robo asset growth is slowing, their costs are getting higher and the average account size is going down,” Hensrud noted from her research into the underlying economics of the top robos today.
Using some linear assumptions about payback to capital raised -- 30% per year is a typical metric venture capital funds require, Hensrud noted -- in seven years, Wealthfront needs to get to $162 billion in AUM to provide those minimum returns to their VCs, while the hurdle rate for Betterment is even more daunting at $257 billion in AUM. See: What to make of Wealthfront's three big hires and why its artificial intelligence bid may be indefensible as a strategy
Trouble ahead
After eight years in existence, Betterment and Wealthfront have only been able to gather around $5 billion each, yet due to their capital raise, operating models and low revenues per client, and there is trouble ahead, Hensrud predicted.
FolioDynamix is making big moves that rely on partnerships with software firms that position themselves toward RIAs and IBD reps. It announced several deals with popular advisor software packages, including MoneyGuidePro for financial planning, RiskPro for risk analysis, Quovo for account aggregation and Scivantage for robo services, all integrated into the FolioDynamix platform to help advisors better manage clients by cutting down on manual processes. While not available just yet, FolioDynamix promises to roll out this one-stop software shop. See: Curian Capital predators position to pounce -- but a few copiously keep their distance to avoid quills
“Given the many trends impacting the industry, advisors need to meld together technology with their personal, human approach into a ‘Cybernetic financial advisor’ model,” Dunlap said, bringing up images of Lee Majors as the Six Million Dollar Man from the popular 1970’s TV action series. “To solve for these problems we are coining the phrase, ‘fiborg’ and our new platform is the ‘fiborg Constellation’ that brings all of the components of technology needed to succeed in the new wealth management era.”’
riabiz.com/a/2016/9/23/...robos-and-call-them-a-free-beta-test