Recent reports of the growing sophistication of individual retail investors have proved true on one roboadvisor platform.

Mike Sha, CEO and co-founder of SigFig, a digital investment management platform and roboadvisor, said that he noticed fewer big changes from users during market volatility associated with the Covid-19 pandemic.

“We’re seeing from investors a much more long-term orientation than in the past, and we’re hearing that from the advisors we work with, too,” said Sha. “The idea of goal-setting for the long term has kept investors more calm during periods of volatility.”

Covid-19’s impact on consumer preferences provides tailwind for a shift in wealth management towards digital and remote channels, said Sha.

“I think many of these changes are going to end up being long-lasting,” he said. “We’ve fast-forwarded ten years in terms of getting more of the populace into a digital engagement model.”

For banks and other large financial institutions, partnership with a fintech firm may help accelerate their deployment of technology, said Sha, while engaging third parties is likely the only option for small- and mid-sized firms to comprehensively build out their technology offerings.

SigFig has seen an increased interest in institutional demand for its managed account services, said Dan Mercurio, general manager and head of revenue and strategic partnerships for SigFig.

“We’ve seen enough demand to actually bring on some additional resources,” said Mercurio. “Our solutions kind of broadly solved for client engagement needs in remote and digital channels.”

A Simple Idea
SigFig launched in 2006 as Wikinvest, a direct-to-consumer Wikipedia-like site for investments, which over a handful of years grew to serve hundreds of thousands of users managing tens of billions of dollars in assets.

“Wikinvest was built around this notion that people have a hard time keeping track of all their investments, which is a side effect of the fact that today people tend to have a lot of investment accounts,” said Sha. “Given how quickly people change jobs in today’s economy, a lot of people end up collecting a hodgepodge of accounts, so we built a tool that helped people track their portfolios.”

The company was gradually pivoting to a portfolio tracking and investment comparison platform and an investment advisor referral serice, said Sha. As it rebranded to SigFig in 2012, it added more tracking capabilities and automation, developing more sophisticated portfolio analysis capabilities to help users understand the components of their portfolios. SigFig also became an RIA to provide users advice on how to optimize and streamline their portfolios.

SigFig eventually launched a direct-to-consumer digital investment management service in 2013, said Sha. At the time, the roboadvisor charged users a flat $10 a month to manage money from users’ brokerage accounts, favoring low-cost, diversified ETFs – but allowed them to retain their existing custodial relationships. Users have the option of allowing SigFig to manage all or only a portion of their accounts, and can track investments managed by SigFig side-by-side with their other holdings.

Thus, from the start, SigFig’s platform has been more of a managed accounts platform than a pure-play, standalone roboadvisor. The firm forged partnerships with major brokerages like Schwab, Fidelity and TD Ameritrade.

“We felt like the vast majority of our users, like 80-90%, had portfolios that could be optimized and better managed,” said Sha. ”So we built out what the world likes to call roboadvice. The thing we did quite differently is predict that this is going to be a huge trend over the next four to five decades, and it’s probably going to permeate the financial industry not just in terms of disruptors and new startups adopting tech, but also major players who need better technology to manage investments going forward.”

SigFig’s roboadvisor has consistently won plaudits, most recently being named the best performing roboadvisor in Backend Benchmarking’s Robo Report and Robo Ranking for the second quarter.

Today, SigFig’s direct-to-consumer service comes with a $2,000 account minimum. The servce has no management fee on the first $10,000 invested, after that, it charges a 0.25% annual fee, but users are also given access to live advisors. The offering serves $835 million in assets in over 18,000 user accounts – but its institutional offerings serve many times more than that, with exposure to over a trillion dollars in invested assets.

Beyond Robo
Sha points out that in the early days of roboadvisors, most people thought of them as a new product, channel, segment and audience – it was investing for young people, mostly millennials, who only wanted to engage with their finances via a mobile device – but for SigFig, the roboadvisor is just the tip of the iceberg. Like many advisors, the company has recognized that most of the world’s wealth is not held by millennials, thus it has increasingly sought to work with institutions and intermediaries.

While SigFig has continued to serve clients via a direct-to-consumer roboadvisor, a legacy of its days as Wikinvest, Sha and his partners have also built out an enterprise business-to-business solution to allow institutional partners to integrate its technology for advisors’ use, or offer a white-label version of its roboadvisor to their customers.

Putting roboadvisor-like technology in the hands of advisors and institutions helps to create a higher quality client experience, said Mercurio, and also offers firms the opportunity to streamline their operations.

“Legacy advisor platforms are really optimized for face-to-face conversations, in an office, around a desk or conference table, with the client facing the advisor,” said Mercurio. “In the pandemic, that distribution approach is completely thrown upside-down, and advisors are trying to figure out how they engage with clients remotely and asynchronously – how do they continue a conversation through a portable method of communication that allows clients to contact them when convenient, and allows them to be immediately available to clients when they are needed?”

Early on, the company’s institutional clients white-labeled the SigFig roboadvisor to serve consumers directly, said Mercurio, building the investing capabilities into their core banking services.

In time, advisors at those institutions demanded similar technology for their own practices.

An Advisor's Copilot
Thus, in 2018, SigFig launched CoPilot, an advisor-facing digital wealth platform designed to implement some of the roboadvisor client experience – like streamlined account opening and funding processes – with the hallmarks of traditional financial advice. Copilot also helps advisors eliminate timely tasks like preparing for annual reviews – the platform can automate most of the process of preparing a review for clients.

Rather than an annual review, CoPilot can create a continuous review process allowing for ongoing interactions between advisors  and their clients, said Sha, the ritual of having someone come into the office once per year is no longer necessary. Advisors and clients can set goals together, and see performance and progress towards those goals in real time.

“The platform also provides advisors more flexibility – advisors using our platforms are offered more choice and discretion, whether it’s in portfolio selection or trading and rebalancing,” said Mercurio.

The firm now partners with banks, including wirehouses like UBS and Wells Fargo, and regional banks like Citizens Bank. Its platforms are available to one-third of U.S. households.

“From a consumer perspective, working with banks is preferable because most of the money that most people invest is their life savings – they’ve spent their careers trying to accumulate it so that they can some day retire, and as a result they want to make sure it’s safe with an institution that they believe is going to stick around, be trustworthy and solid,” said Sha. “Most of the wealth in this country is held with financial institutions, so the majority of assets managed with software will end up being managed through an institution.”

Mass affluent consumers, a group coveted by many human advisors and roboadvisors alike, appear to prefer being served by hybrid firms that can offer both digital and in-person services, said Sha.

Last year, SigFig partnered with institutional data provider Refinitiv to provide tools for investors using Refintiv’s custody platform.

Sha doesn’t believe most fintech startups will survive or prosper for the same reason that most of the online banks founded in the late 1990s were defunct by the mid-2000s – large, traditional banks saw the opportunity and rapidly built out their mobile and online presences, leaving little room for new competitors.

“The same thing is likely to play out in the investment and advice industry,” said Sha “Some online-only player will appeal to a niche of customers, but mainstream consumers are more likely to adopt these kind of services from a major brand.”

For that reason, Sha and Mercurio have targeted Copilot and similar business-to-business capabilities as a key source of SigFig’s growth moving forward, and are seeking additional institutional partners. The company will continue to expand its platform and add functionality, said Sha, and attempt to broaden and deepen its relationships with clients and intermediaries.