The Next Wave of Online Advice

Post on November 22, 2013


Since the financial crisis, a number of companies, from Silicon Valley start ups to established financial firms, have made big bets that individual users will increasingly get financial advice, portfolio strategies and clear performance metrics directly from online platforms. For some, the fear is their arrival heralds the doom of the flesh-and-blood financial advisor, an unjustified fear we wrote about in June, 2012.

The hype that these portals, like Betterment, WealthFront, LearnVest and Personal Capital, among others, will eliminate the need for advisors is overblown; but the fact that online direct-to-consumer platforms may drive down the value of an advisor’s advice is not. Furthermore, there is a new crop of platforms slated to be introduced over the next several months that will have a profound effect on a human advisor’s fees, say industry analysts, and help clients hold advisors more accountable.

“People are always framing this as, ‘Are advisors going to be replaced by computers, or is this a total collapse?’; it’s more nuanced than that,” said Grant Easterbrook, analyst at Corporate Insight and author of a new report on online advice start-ups. “I really think what these firms will do in the long term is more drive down the cost of portfolio selection and investment selection.”

According to Easterbrook’s report, new algorithm-based advice services are in the works, including Financial Guard and Quovo, expected to launch in the fourth quarter of this year, and NestEgg Wealth, expected to come out in late 2013 or early 2014. Invessence, a new low-cost online managed account system, should go live by the end of this year. New online financial planning tools Plumvo and iQuantifi are in beta testing.

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