Robo-advisors threatened by Schwab, Vanguard

"This feature is a major competitive advantage compared with the online-only model in which investors can save five basis points, but at the cost of being able to talk to a human," the Cerulli report says.

The report also points out an obstacle for robo-advisors that use Vanguard ETFs in their portfolios.

"Many eRIA firms find themselves in a tight spot; they often use low-cost Vanguard ETFs to construct their portfolios and will now have to explain how their service is superior to Vanguard's," according to Cerulli.

Cerulli's research suggests that robo-advisors, like Wealthfront and Betterment, will need to adapt and change their business models to remain competitive.

"With increased fee compression and expanded services from the direct space," Cerulli says, "eRIAs may be forced to change their business models to become technology providers to advisors."

While many of the eRIAs pitch themselves as a "revolutionary Web-based advisory model," Cerulli notes that their model may not be that revolutionary.

For example, Wealthfront established relationships with Google and the San Francisco 49ers, which helped its average account size grow to approximately $80,000. As Cerulli notes, this is higher than its main rival, Betterment, whose average account size is close to $17,700. And, to make sure the model is scalable, key account managers need to manage the relationship between the robo-advisor and its business-to-business clients.

"By partnering with businesses, eRIAs are not a radical departure from the existing financial advisory model," according to Cerulli.

There are some robo firms that already have unique business models that don't pose a threat to the existing advice model. Cerulli points to firms such as Covestor or Motif Investing.

"Covestor essentially acts as a model separate account supermarket, in which asset managers submit their models to Covestor and the firm executes the models on behalf of the client," the report states. "While they do offer portfolios based upon different risk profiles, they are primarily a supermarket. Such firms can present an opportunity for asset managers that offer model distribution."

Meanwhile, Motif lets clients create their own investment ideas or "motifs." Motif does not offer advice, but the firm is attempting to create a community of users who present their investment ideas for implementation by Motif.

"[T]his model does not compete with wealth managers because active do-it-yourself investors dominate the client base," Cerulli states.