A big money manager just changed its mind on the future of robot advice

Can I sell you an ETF?
Can I sell you an ETF?
Image: Reuters/Benoit Tessier
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Another big asset manager thinks robots are the future. Aviva, which oversees £450 billion ($592 billion), is buying a majority stake in robo investment service Wealthify. Aviva was less bullish on robo services last year when an executive reportedly said such advisers are a “long way” from getting traction.

Automated investment accounts for a sliver of the trillions of dollars of individual investor money outstanding, but just about every big portfolio manager thinks that share is likely to grow. BlackRock, the world’s biggest asset manager, bought a stake in Anglo-German company Scalable Capital this year and snapped up US-based firm FutureAdvisor in 2015. UBS started its own robo service, giving people some access to the Swiss bank who previously couldn’t have afforded it.

Cardiff-based Wealthify was started in April 2016 and is trying to attract millennial savers and people who are new to investing. It has a minimum investment of £1 and offers five plans, which is a more limited offering than the customizable services some companies have. Wealthify doesn’t disclose how much money it oversees, but says the deal will give it access to Aviva’s 15 million customers in the UK.

“Aviva has perhaps realised that there is a great opportunity in opening up wealth management and investment services to a much broader audience of people,” Nick Middleton, co-head of UBS SmartWealth, said in an e-mail.

As robo services catch on, the risk for big money managers is that they could get left behind. BlackRock has the expertise to build its own service, but it could have taken years for it to be ready, with no guarantee of it ever getting traction with consumers, according to Frederik Meheus, head of international distribution technologies at BlackRock. That’s why it decided to buy a stake in Scalable. “It’s all about time to market,” Meheus said recently at a conference in London.

Even so, there’s little agreement on the best model. For example Wealthfront, one of the early robo-investing pioneers, is 100% automated because it thinks millennials are more comfortable figuring things out via an app than chatting with an adviser. Betterment, another pioneer, was originally an all-digital service, but added a human adviser option to premium plans earlier this year. The services also differ widely in terms of minimum investments, types of assets, and fees.

They generally have one thing in common, however—the automation is often cheaper than a traditional human adviser. As the financial industry grapples with declining margins and new regulations, robots may be the only way forward.