HYBRID ROBO-ADVISORS: Here’s how incumbent wealth managers are successfully implementing the hybrid robo-advisor model

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Digital wealth managers, also called robo-advisors, emerged after the 2008 crisis as fintechs aimed to simplify and democratize wealth management services with technology-first solutions. And while these robo-advisors changed the wealth management game by offering such services for a lower fee, many players have chosen to maintain a human aspect within their offerings. Known as the hybrid robo-advisor model, this approach intertwines technology and human touch.

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The hybrid robo-advisor business model complements conventional wealth management services and can help attract more users, which will push more incumbent financial services firms toward this approach. Hybrid robo-advisors link the cost and maintenance efficiency of a purely digital robo-advisor with the human advice of conventional wealth management services. These offerings therefore often have a lower fee than legacy services, while still providing personalized guidance and advice from humans to support customers and reassure them amid market volatility.

The coronavirus pandemic has further highlighted the need for wealth management solutions that offer a human touch. The market has been particularly volatile and unpredictable during the pandemic, including some of the worst weeks for stocks since the financial crisis in 2008 as well as some quick, unexpected recoveries. This has likely caused unease among investors, but hybrid robo-advisors can mitigate unrest by leveraging their human advisors to explain market volatility and investment strategies.

In The Hybrid Robo-Advisor Report, Insider Intelligence examines hybrid robo-advisors’ operational benefits for incumbents looking to diversify their offerings, and highlights how the pandemic has affected such companies. We define a maturity model for hybrid robo-advisors to showcase important features and capabilities that incumbents should take note of to find success, especially when it comes to adding human financial advice to digital products. The report also spotlights four key incumbent players in the US hybrid robo-advisor space—Charles Schwab, TD Ameritrade, Vanguard, and BlackRock—and evaluates their onboarding processes, technology and human advice, and pricing. Additionally, we discuss key considerations regarding their offerings.

Our outreach process involved interviews across three providers—Charles Schwab, TD Ameritrade, and BlackRock—in September 2020, while Vanguard’s profile is based on desk research due to interviewee unavailability. Interview quotes have been lightly edited for clarity.

The companies mentioned in the report include: ABN AMRO, Betterment, BlackRock, Charles Schwab, Fidelity, Moneyfarm, Nutmeg, Personal Capital, TD Ameritrade, Vanguard, Wealthsimple

Here are some key takeaways from the report:

• Hybrid robo-advisor products have been met with exponential growth over the years, and we believe that the pandemic and millennial wealth transfer will further accelerate growth.
• Hybrid offerings are likely attractive to consumers amid the pandemic because human advisors can provide additional support and reassurance, yet the crisis also presents specific challenges for the business model.
• Hybrid robo-advisors can cut costs along the value chain using technology, which means they can be offered at a lower price and potentially lure in younger users who can be upsold later.
• Advanced hybrid wealth managers are able to fully support their users with humans, while also enabling self-service if that’s a customer’s preferred method, to provide a convenient and flexible offering.
• Charles Schwab, TD Ameritrade, Vanguard, and BlackRock all launched hybrid robo-advisors, and they’re successfully combining human input with advanced technology to offer their clients tailored services. 

In full, the report:

• Outlines the benefits of offering a hybrid robo-advisor.
• Explains how the coronavirus pandemic has impacted the sector, and provides recommendations what companies can do to navigate the crisis.
• Details what kind of features a hybrid robo-advisors should have to be competitive, and provides insight about where a service falls on our maturity scale.
• Spotlights four players within the hybrid robo-advisor space and offers insights into their respective services.
• Discusses how these four players onboard new clients, manage portfolios, price offerings, and notes key considerations for each of their services.

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