If you have seen a zombie movie, you know that regular humans are not prepared for the zombies when they attack.  That is because the masses are unaware of what is happening early on. They only see the late stage when the zombies are threatening to wipe out the entire human race.

Just in time for Halloween, Dan Egan, director of behavioral finance at Betterment, spoke of zombies to prove a point. Right now the industry is not seeing the robo advisors’ client growth as a threat.

“You have to keep in mind zombies. People are not really good at estimating compound growth. The day before the population is one hundred percent zombies it was at fifty percent zombies.  It is going to sneak up on you,” said Egan.

Egan spoke at a breakout session at LIMRA’s annual conference in Boston, Mass. He was joined by a facilitator, Eric Sondergeld, corporate vice president of strategic and technology research for LIMRA.

Who Robos Focus On
“We have a blue ocean of consumers in front of us. People that have never had financial advice ever offered to them,”said Egan.

Betterment and other robo advisors are trying to create a better online customer interface to catch the wave of clients that are comfortable with the commoditization of investment management. There are four criteria in this target market. They have to be:
1.  Comfortable online. 
The good news for robo advisors is that those that are not comfortable online are dying off. Literally, Betterment is seeing some of their best clients coming from inherited IRAs.

They are even seeing sixty percent of logins come from mobile devices.

2. OK with passive investments.
Betterment, like most robo advisors, does not have its own funds. They mainly use ETFs and Vanguard funds represent their largest offering.

3.  Cost conscious.
Betterment’s thirty basis points (and lower for larger clients) is a lot more appealing to this type of person than one hundred basis points or more offered by most traditional advisors.

4. Tax conscious.
Betterment actually has messages when some clients try to do a trade to help educate the client of the tax consequences of making a trade. Egan thought showing the negative side of a trade is something that is rare in the industry.

So the standard idea that the robo advisors are aiming for younger clients is not accurate. While Betterment’s average client age is in the mid-thirties range, they are not limiting themselves to just younger investors.