Digital advice providers, or robo-advisors, have found great success as measured by the number of users and the assets they have attracted. But recent research by Corporate Insight suggests that even the largest standalone robos and those bolted onto existing financial services platforms are missing the boat in substantial ways when it comes to meeting the preferences of their targeted customers.

Jen Butler, senior analyst, explained that the “core of what we do” at Corporate Insight is to explore the digital user experience of, for example, banks and insurers. Those companies might hire Corporate Insight to assess their specific offerings using traditional market research. The company also follows an 'audit' process of all the offerings in a market vertical, surveying multiple companies and its customers and comparing each company's strengths and weaknesses vis-a-vis their competitors with the insights of their customers, creating benchmarking analysis for its clients.

But Corporate Insight then unearths some of its most telling insights by opening “live funded accounts” at all those companies, Butler said. That, she says, allows the firm to directly “get the user experience,” which supplements its survey data.

In late April, Corporate Insight released its Digital Advice Audit service, which benchmarks a specific firm's digital advice user experience. The service is partly built on the findings of a late 2018 survey of 1,100 digital advice customers and prospects that collected data on customers' expectations, behaviors, preferences and satisfaction with their provider's technology and overall service.

So what findings from the audits and the survey are of interest to advisors or broker-dealers who might want to partner with an “startup” robo-advisor that white-labels its offerings or use a broader platform service like Schwab's Institutional Intelligent Portfolios?

First, making that robo partnership decision could be important for individual RIA firms and BDs, says Butler, since the industry is reaching a “level of parity” that makes it difficult for individual advisors to compete, unless “they want to compete on price, which is continually compressing.”

The benchmarking data suggests many robo websites fall short in meeting user expectations in areas like goal planning and education. There is a line firms have to “walk between finding ways to get people engaged in the advice process, but also disincentivize too much engagement” so users don't pull out their assets willy-nilly at times of market volatility, she said. A “pure” robo (i.e., one without human advisors) like Wealthfront walks that line, Butler said, by focusing on its Path aggregation-based multi-goal planning tool that's easy to use and allows users to mark progress toward multiple goals.

By contrast, 'incumbent' providers like Fidelity, Vanguard and Schwab started their downstream, digital advice offerings as a defensive measure to serve the mass affluent, Butler pointed out. So their user experience is more focused on efficiently creating inexpensive portfolios and features like automatic tax loss harvesting.

Here's another trend. Startup robos are starting to offer “freemium” access, which includes, in Personal Capital's case, a “robust” aggregation-based analysis tool that links to held-away assets to discover any issues — e.g., improper asset allocation or high fees — within a user's overall portfolio. It then makes suggestions to move those assets to the user's Personal Capital account to remedy the issue. While that could be a benefit to users, Butler points out that “it remains to be seen” whether the SEC would consider those suggestions “advice.”

Another shortcoming identified by Corporate Insight's survey was mobile functionality. While robo customers tended to assign higher importance to their provider's website, 73% of users surveyed said it was either “very important” or “extremely important” to provide a mobile app. There is opportunity to improve those apps, Butler said, especially because not many providers even offer mobile apps. Instead, the functionality is embedded into “what is essentially a mobile trading app,” she said.

The startup providers tend to offer the best standalone apps, Butler said, though Schwab's Intelligent Portfolios' app is “very intuitive and usable.”

Perhaps not surprisingly, Butler reported that the majority of the users surveyed who said a mobile app was highly important were millennials. But then again, the average age of the users surveyed was 42, and many fell into the demographic segment of HENRYs — High Earners Not Rich Yet.

One final finding might not provide much comfort to advisors who worry about robos taking away their livelihood. In its survey, Corporate Insight asked users of hybrid offerings — which combine robo-advice with access to human advisors — whether they had used human advisors before; 76% said they had. The survey then asked whether those robo-affiliated human advisors were better or worse than their previous advisors; 68% said their new advisors were better.

Instant Insights /

The trouble with robo-advisors

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