One interesting difference, relative to other areas of the industry, Betterment has a larger ratio of female customers, although they are still the minority.
The balances are still smaller than the traditional advisors, with an average size of $24,000 and their customers are only holding between twenty and fifty percent of their portfolios with Betterment.
In a follow-up question, Egan stated that he believes their target market represents about $25 trillion.
What Might Help Robos
With the increasingly prevalence of 401(k) plans, retirement investing is being left up to the investor.Egan said it was a “tremendous opportunity.” That is because there are a large number of assets are associated with those left ot fend for themselves. Egan added that they are “probably not doing it optimally.”
A big part of the robo advisor strategy is to democratize investing. Without having large minimums that their competitors require, they are able to start clients at much smaller balances and create goals for things like retirement or emergency funds. The service then provides time horizons and messages if their clients go off track.
Still, awareness for robo advisors is low. Sondergeld pointed out that LIMRA research shows that eight out of ten investors are unaware of robo advisors. However, one focus group LIMRA recently did showed that getting picked up by the national media, like NPR, might make a difference.
Betterment is starting to advertise in a different way too, which will be very data driven. Egan said he saw his company logo on cabs on the walk over to the conference.
It is not just PR, advertising and referrals that are driving business. “Thirty to forty percent of our customers drop out of the sky. They literally come out of nowhere,” stated Egan.
Egan pointed out that they can also team up with advisors. “We have horizontally shifted our platform. Advisors tend to do higher-end financial planning. We are a turnkey asset management program running in the background,” noted Egan.
He went on to say, “The Betterment institutional tool is geared for advisors.” He gave the XY Planning Network as an example where fee-only financial planners that are not compensated by asset management fees use Betterment and stick to doing the financial planning.
It Is Good To Rock The Boat
William Taylor, co-founder of Fast Company, gave a keynote that spoke to the over 500 attendees at the LIMRA annual conference earlier in the morning. His observations over the twenty years of his organization were somewhat related to the potential zombie-like uprising of investors that the robo advisors might benefit from.