ROBO ADVISOR: Digital Drives Fidelity Fund Prices to $0, Morgan Stanley to Pay Advisors for Digital Engagement.

Roboadvisors have failed, you say. Hedgeable is closing down. Robos barely made a dent in assets under management -- crossing $200 billion, as compared to the full market of $40 trillion in US wealth management, or even when compared to the $3 trillion of assets that sit with independent RIAs. Further, when looking at where those assets sit, Schwab and Vanguard hold the lion's share, with the top 3 independent B2C contenders floating at $10-15 billion each. Well, not so fast. First, we point you to a great report from Backend Benchmarking on the space, which shows that from a pricing and features perspective, the fintech startups are still doing a great job. Betterment and SigFig each are eclipsed only by Vanguard out of incumbents, while still holding on to the capacity for quick innovation, thereby defining the path of the maket.

Second, companies like Morgan Stanley are fairly desperate to implement digital wealth in existing client books. The wirehouse just launched its digital tools -- goal based financial planning and account aggregation (i.e., Personal Capital in 2012). To incentivize advisor adoption, the firm is increasing payouts to advisors by up to 3% if clients use the software tools that show external assets, and leverage internal banking and lending products. The latter part is Wealthfront's and SoFi's playbook. Imitation is the sincerest form of flattery. From a broader perspective, remember the recent mega deal: Financial Engines acquired by a private equity firm for $3 billion, merged with Rick Edelman's massive RIA, distributed through the footprint of the Mutual Fund store. All of this is digital wealth.

As a final symptom, we leave you with Fidelity. As Autonomous analyst Patrick Davitt highlighted earlier this week, Fidelity will (1) offer free self-indexed mutual funds to their brokerage clients, (2) eliminate minimums to open a brokerage account, competing with Robinhood, (3) eliminate account and money movement fees, (4) remove minimum asset thresholds on Fidelity mutual funds and 529 plans, and (5) reduce and simplify pricing on its index mutual fund product suite. On the latter, the average asset-weighted annual expense across Fidelity’s stock and bond index fund lineup will decrease by 35%, with funds as low as 1.5bps. But to say it again -- Fidelity is rolling out index mutual funds with a $0 price. That's a price that works in a digital wealth offering.


Source: Roboadvisors (Daily FintechThe Robo Report), WSJ (Morgan Stanley), Bloomberg (Fidelity), Think Advisor (HedgeableEdelman), Morgan Stanley (GPS Screenshot)