Headlines the week before Halloween reporting that Wealthfront would offer free digital financial planning might have spooked some human advisors.
After all, providing holistic financial planning seemed like the way advisors could add value and counter the growing competitive threat from robo-advisors.
So how significant is Wealthfront’s free offering of its Path planning tool? A WealthManagement.com poses that question and gathers responses from financial professionals.
“Making higher-value services, such as pension advice, available free of charge will allow Wealthfront to widen its customer base and take away market share from traditional players,” Heike van den Hoevel, senior wealth management analyst at GlobalData, was quoted saying. “Our data shows that cost of advice is a big deterrent.”
GlobalData’s research shows few investors view robo-advisors as primary investment providers, but van den Hoevel said that as “algorithms continue to evolve, the proportion of investors that regard their robo advisor as their primary investment channel is set to rise.”
One of the best-known advocates for financial planning, Michael Kitces, co-founder of XY Planning Network, offered an interesting take on Wealthfront’s move, likening it to the industry’s early years.
“It’s also embarrassing that Wealthfront is now trying to ‘disrupt’ human advisors by offering free financial planning as a loss leader for a managed account w/ proprietary products,” Kitces tweeted. “That was the 1980s model of FP, that today’s fee-only FPs have spent the past 30 years disrupting!”
Kitces also questioned how many of Wealthfront’s potential customers would have wanted a human advisor to begin with, saying the company’s move is “competition for other do-it-yourself platforms like Schwab or Vanguard.”
Human advisors should be OK, so long as they’re offering financial planning services, said John Wise, CEO of digital wealth platform provider InvestCloud. But he added that Wealthfront’s free planning tool will force them to offer more sophisticated planning advice.
He also said humans still hold a key advantage over software in relating to clients. “It’s not just computation that’s important, it’s digital empathy,” he was quoted saying. “How empathetic is the experience to you, the user?”
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