With the exception of hybrid digital advice firms that employ teams of advisors, pure automated investment solutions rely heavily on digital features to address ongoing—and sometimes evolving—investor needs. In reallocation scenarios, pure robos must balance self-service capabilities that permit investor-defined changes with features that either limit excessive alterations or educate clients on the potential implications of a portfolio adjustment. For this report, we examine the various reallocation features and processes of pure and hybrid automated investment firms.
Forty-six percent (46%) of the firms in the Digital Advice Monitor pure robo coverage set exhibit reallocation processes that fully restrict investors from self-identifying a new portfolio model or risk tolerance, while 30% of the firms offer optional questionnaires. The remaining 24% allow investors to choose a new risk profile or portfolio strategy manually. Fifty-four percent (54%) of firms incorporate progress barriers or notifications designed to alert investors of the tax implications of reallocating, while 23% block users from choosing allocations that fall outside their assigned risk. During the process of reallocation, several firms display an abundance of portfolio data to help inform the investor’s choice. The best examples of transparent portfolio presentment include Charles Schwab Intelligent Portfolios, E*TRADE Core Portfolios, Merrill Guided Investing and TD Ameritrade Essential Portfolios.
The hybrid firms in the coverage set—Charles Schwab Intelligent Advisory, Personal Capital and Vanguard Personal Advisor Services—require advisor consultations in order to initiate allocation adjustments. Detailed findings of these consultations are included in this report to illustrate the techniques advisors use to persuade account holders against reallocation and to validate clients’ understanding of risk.
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