Merrill Lynch is piloting a new hybrid digital advice offering for its managed account suite, Merrill Guided Investing with Advisor, according to a recent ADV filing. Positioned as a combination of Merrill’s pure-robo (Merrill Guided Investing) and its traditional managed service (Select Portfolios), the new platform offers clients access to the full digital account experience with the added benefit of advisor support.
Clients in the program pay an annual fee of 85 basis points and must meet a $20,000 investment minimum, matching the price of the Select Portfolios program. They receive a portfolio comprised of ETFs (and potentially some mutual funds) based on their responses to Merrill’s Online Profiling Process, the same questionnaire offered to Merrill Guided Investing applicants. Clients do not have access to a dedicated advisor or comprehensive financial plans, but a team of Program Advisors is available for periodic account reviews and answering questions.
Based on the ADV brochure, Merrill Guided Investing with Advisor is not as unique or robust as some of its hybrid predecessors. But while it may not be a groundbreaking addition to the digital advice market, Merrill’s new pilot program is significant in what it represents: the continued rise of the hybrid-robo.
In the years following the 2008 financial crisis, the wealth management industry underwent rapid expansion in the digital advice space as startups and incumbents launched automated investing services. When digitally managed accounts first appeared, most were positioned as low cost, set-it-and-forget-it models designed for the underserved investor—young, mobile-first, mass-affluent and often inexperienced. More so, digital advice accounts were touted as an all-in-one option where clients could meet their needs digitally without the assistance of a human advisor—a significant reason for the services’ low cost. Recent surveys and reports on consumer behavior, however, reveal that investors do not desire a purely digital experience as strongly as once believed. Rather, most robo users and prospective clients want some level of human guidance from their digital advice providers.
Hybrid models like Merrill Guided Investing with Advisor help fill that gap. Since 2015, various firms have launched hybrid digital advice services, giving clients the benefits of a digital-first platform with the added element of human support. Among the 14 firms tracked in Corporate Insight’s Digital Advice Monitor coverage set, three incumbents and two startups currently offer a hybrid model:
- In 2015, Vanguard launched Vanguard Personal Advisor Services, a hybrid account with a minimum of $50,000 and an annual fee of 30 basis points.
- In 2015, Personal Capital released its hybrid platform, which has an investment minimum of $100,000 and a tiered fee structure ranging from 0.49% to 0.89%.
- In January 2017, Betterment launched its hybrid model, Betterment Premium, which has an investment minimum of $100,000 and an advisory fee of 0.40%.
- In March 2017, Charles Schwab launched its hybrid service, Schwab Intelligent Advisory, which has an account minimum of $25,000 and an advisory fee of 0.28%.
- In May 2018, TD Ameritrade launched Personalized Portfolios, its newest hybrid solution. It has a $250,000 investment minimum and the advisory fee varies depending on the portfolio and investment account.
Notably, not all hybrids are alike. Corporate Insight’s Q2 Digital Advice Monitor Report—Financial Planning for the Digital Customer: Aggregation-Based Portfolio Analysis & Goal Tracking Tools—and our most recent report—Analyzing the Extent of Advice: A Review of Pure and Hybrid Robo Advisory Support—found that some firms (e.g., Personal Capital and Schwab Intelligent Advisory) offer far more robust functionality and access to advisors when it comes to financial planning, goal tracking and account analysis than others (e.g., Betterment). Still, unlike their pure-digital counterparts, all hybrid models provide clients with some level of human guidance outside of standard application assistance and account maintenance.
Investor data reveals that the availability of this human guidance can, and often does, impact provider selection. Corporate Insight’s 2018 Digital Advice Investor Survey found that 26% of robo users selected their provider based on access to human advisors/planners. Additionally, 61% of all robo users indicated that 24/7 access to a human advisor was important to them. Interestingly, breaking down the responses by generation, Millennials placed the highest importance on access to human advisors; 72% stated this was important to them, compared to 56% of Gen Xers and 45% of Boomers Plus. Among the non-user segment, 27% reported that access to human support was the main reason for their interest in a digital advice solution, while 40% indicated that the ability to speak with a human advisor/planner whenever they wanted would increase their interest in opening an account.
Importance of 24/7 Human Access among Robo Users
Clearly, despite the technological acumen of up-and-coming investors and the rapid growth of account management technology in the financial industry, human advisors are still in high demand among digital advice customers and potential clients. Indeed, many users simply desire both the human and the digital benefits of their provider. As demand grows for the digital-plus-human support model, Merrill’s new platform is likely to become just one of many new hybrids on the horizon that make investing and personal guidance accessible and affordable to underserved investors.