As much as we love a verbal brawl — especially one that pits robo-Davids against a robo-Goliath — it's time to call a truce in the war of words among robo-rivals and get back to business.
Wealthfront chief executive Adam Nash unleashed the first volley a couple of weeks ago, when he
accused industry giant Charles Schwab & Co. of purposely misleading investors by promoting its new robo-adviser service, Schwab Intelligent Portfolios, as “free.”
Mr. Nash opined that investors actually will pay thousands of dollars in opportunity costs related to high cash allocations and expensive smart beta exchange-traded funds, many of which are proprietary or “from issuers that pay Schwab to use them.”
In an unsigned retort, Schwab
defended its decision to include cash as one of the asset classes selected by its robo-adviser.
It then accused Wealthfront of overcharging investors by taking a 0.25% management fee, calling such fees “sunk costs for investors.”
SNARK ALL AROUND
“Adam wishes he could build a moat around Wealthfront and protect it against competition,” Schwab wrote in its post.
Of course, it did not end there.
Also jumping into the battle with a little snark of his own was Betterment CEO Jon Stein, who went on CNBC and made the dubious declaration that Schwab was “too late” to the robo-market.
In the end, the game of tit for tat being played by Schwab and its robo-competitors — though interesting — is little more than a distraction in the evolution of automated advice platforms.
For better or worse (and this publication believes largely for better), robo-advice is here to stay. After all, automated investment guidance provides a much-needed service to mom-and-pop savers and millennials.
Flesh-and-blood financial advisers would be better off focusing on how to continue expanding their range of services in order to justify their own 1% to 1.25% fees, rather than getting caught up in the hype and hoopla among robos desperately trying to make sure they don't get put out of business by the likes of Schwab.
