(Image: "Robocop," 1987)
The robo-advisory industry is moving into its next phase, from disrupting traditional financial advisory services with cheap, passive asset management and low minimums, to taking on traditional deposit banking with cash management and saving products.
We're starting to see the early phases of an evolution," said David Goldstone, analyst at Backend Benchmarking, which publishes The Robo Report.
(Related: The Best Performing Robo-Advisors of 2018)
Its latest edition, which covers the first quarter of 2019, is filled with examples of these offerings, though some predate that quarter:
- Wealthfront's FDIC-insured high-interest cash accounts with an APY of 2.29%
- Betterment's Smart Saver account, which invests in short-term bonds and can be linked to a Two-Way Sweep that gathers excess money from a customer's bank account to earn a higher interest rate and reverse that transaction if the bank account balance runs low
- SoFi's online checking account, which links to a savings account that is federally insured
- Stash Banking and Acorns Spend, which issue debit cards whose purchases are rounded up to the nearest dollar and the difference between the purchase price and the roundup is invested. Acorns invests the excess funds in ETFs; Stash invests them in fractional equity shares. Both programs are also linked to FDIC-insured banks.
"The expansion from digital investment advice to cash management and banking is well underway," according to The Robo Report. "These attractive offers from fintech companies will continue to ramp up competition amongst traditional financial advice firms and banks."
A number of robo-advisors will also have more money available to fund business expansion. Acorns, Personal Capital, Ellevest and Nutmeg, a U.K.-based robo-advisor, raised a cumulative $250 million in the first quarter, according to The Robo Report.
"There's still an appetite from venture capital for investing in independent robos who have become established, with a large customer base," said Goldstone.
