ROBO ADVISOR: JP Morgan plans to starve Robinhood (and all other Fintech) of Oxygen

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JPMorgan is taking on fintech unicorn Robinhood. The bank is launching a service branded You Invest, directed at their 47 million digital/online banking clients, which includes (1) 100 free trades/year, $2.95 thereafter, (2) free investment research, (3) unlimited free trades if a Chase Private client (typically $100k in holdings), (4) portfolio construction tools, (5) and following up with a roboadvisor in January. This comes on the heels of its announcement of Finn, the mobile-first neobank for its customers, which preempts Revolut and Monzo from doing too much damage in the States. Sounds like a bunch of proprietary Fintech offerings, all priced to blow up the venture capitalists.

And JP Morgan isn't the only one. Remember, Fidelity just recently launched an ETF that costs 0 bps in management fees.  They can afford to do this the same way that Schwab can give roboadvice away for free -- bundling. If the firm doesn't make money on investments, it still has cash sweep; or if it doesn't have commissions, it has assets under management; or if it gives away the core, it can still charge you for satellite. Such mega-banks with diversified business lines are going to fight Fintech companies by starving them of oxygen. It is essentially reversing the strategy of the unbundling Fintechs, who use venture capital funds to price undercut incumbents. But in this case, the incumbent copies an innovation and gives it away for free.

The competitive response from the start-ups has been to also rebundle. FinancialPlanning.com calls this the "super robo". See for example microinvesting app Acorns, partnered with PayPal, offering its 1mm+ users a debit card with a checking account. Or look to SoFi, a student lender with roboadvice and insurance offerings. Over the pond, German neobank N26 has every permutation of financial product a Millennial may want to buy on their phone. All these firms will need to have payments, savings, wealth, and insurance under one roof, powered by artificial intelligence, customized to perfection. Can they outspend JP Morgan's $10 billion per year? And did we mention that Bank of America, Wells Fargo and Citi are in the game too?
 

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Source: JP Morgan (CNBC), Financial Planning (Super robo)