Robo-Advisor Dream of Disrupting Wall Street Wealth Is Not Working Out Exactly as Planned

The robo-advisors were right about a lot: there is a new generation of investors that was being underserved by the incumbents and looking for a digital-first approach to help them with core investment and financial planning. And among robo-advisors, Wealthfront, Betterment and Personal Capital are notable for achieving real scale, not easy to do — Wealthfront has roughly $27 billion in assets under management.

Wall Street banks, without even trying, are sitting on big assets in the digital investing space. Speaking about its You Invest platform,CEO Jamie Dimon noted on its recent earnings calls,"Self-directed investing has $55 billion. I think, Robinhood has, I think, $80 billion the last time I saw or something like that. We're not sitting here bragging about our product because, I would tell you, it's not good enough yet.

"Customer acquisition costs have been the thorn in the side of robos since day one," Goldstone said."In the early days, they grossly underestimated how much it would cost." "UBS probably bought Wealthfront much more for the customers than the tech," Wong said."To expand into this emerging high-net-worth market. Wealthfront has it."

"My best guess is they were probably gunning for an IPO early on, to stay independent and exit through an IPO, but it's very difficult to compete with Vanguard. They were the largest robo-advisor in the market within a few years," Goldstone said."Getting their brand out there, finding new clients and achieving scale, all of it is difficult ... all of it has been difficult for robo-advisors from the beginning.

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