“It appears that roboadvisors are starting to expand their market or are realizing that many people do want human advice, someone they can chat with,” says Schapiro. “That’s a trend we’ve identified since the start of the study.”
Condor will consider any roboadvisor directed towards retail investors and advisors for its study, but does not include tools that an investor cannot use without intermediation from an advisor like most professional planning software.
Condor also tracks news around the roboadvisory industry, publishing a short digest as part of its quarterly reports.
“I don’t feel like the market is going to support a lot of different robo-only firms,” says Schapiro. “Generally, these firms are not profitable, but losing money on a roboadvisor is not a big deal for Vanguard or Schwab, where a roboadvisor can serve as a loss leader for them. They can also use roboadvisors to move assets from self-directed accounts to managed accounts, which means they can garner more assets, produce more revenue from those assets, see more consistent performance in those assets, and keep those assets for a longer period of time.”
The report doesn’t offer investors any insight into the effects of advisory services offered around digital advice providers, whether they be automated recommendations and prompts delivered by a roboadvisor algorithm, or financial guidance provided by call centers full of advisors.
The report also doesn’t consider other value adds offered by digital advice providers, such as Acorns’ automatic deduction and saving tools, Wealthfront’s direct indexing for large accounts or Personal Capital’s holistic do-it-yourself planning offerings.
In the past, Condor has received backlash from companies controlling some of the roboadvisors it is studying, says Schapiro. Most often, negative responses criticize the time horizon or research methods of the study. However, in some cases,companies have attempted to cancel or block Condor’s access to roboadvisory accounts.
In the past, providers like Wealthfront have closed Condor’s roboadvisory accounts, while Vanguard moved a Condor account from its Personal Advisor Services platform to a self-directed account. Both companies have since reversed course and permitted Condor to continue its research.
“We’ve seen a new trend of roboadvisors contacting us directly and wanting us to include them in our study,” says David Goldstone, a Condor Capital research analyst. “Since we’ve become established as a go-to source for this kind of information, we’ve also seen less push back from companies trying to close our accounts.”
Schapiro says that the BackenDBenchmarking techniques applied to roboadvisors will eventually be applied to any investment available in the retail segment.