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“In the U.S. over the last six months, Acorns has been absolutely dominant driving Twitter impressions amongst consumers. Not a single incumbent wealth firms even makes the top 10.”

— Josh Book, CEO, Parameter Insights

Josh Book is the Founder and CEO of Parameter Insights, a data, research, and advisory services firm focused on delivering innovative, scientific, and consumer-driven insights at the intersection of digital and wealth management. Josh’s career spans 20 years focused on helping firms innovate and grow.

Parameter Insight’s consumer-focused syndicated research products have been widely adopted in the market place and heralded as the only ongoing consumer-focused and scientific research covering the evolution of the wealth management space in a digital age. Their clients include large banks, independent wealth advisory firms, asset managers, insurance companies, and online advice participants.

Complete Episode Transcript:

Craig: And here we are with the latest episode of the Wealth Management Today podcast. I am excited to welcome Josh Book, founder and CEO of Parameter Insights, a market research and financial services consultantcy, to this episode. Hey Josh!

Josh: How’s it going Craig? So good to be with you.

Craig: Awesome man. So happy to have you here.

Josh: Thank you very much, I’m pleased to be here with you as well.

Craig: We have been all over together, every conference, all over the place. Finally, glad to have you here. We can talk about digital wealth advice research.

Josh: We can talk about that. Let’s talk about consumers. Let’s talk about the evolving wealth management business.

How It All Started

Craig: Tell me about how you, the idea for starting Parameter Insights – you were a consultant then you moved into the research world. How’d you do that and why?

Josh: I call myself sometimes a reforming management consultant. I was at Accenture, and the Strategy Practice previously, and PWC before that, and I guess I got a little bit cynical/disillusioned with the big C consulting work that I was becoming more involved in, in terms of selling large scale, digital strategy analytics types of programs. Where I was struggling to see the clients we were trying to help, meaningfully get traction and access to data that could help them in their day to day business choices. I thought in this day and age, there is just a plethora of data and there should be more access to good strategic thinking based in data. So we founded a boutique consultancy originally called Parameter, whose mission was to help managers and executives make better business choices, but with a data-driven bent on it.

Craig: This is a great idea, because I think a lot of firms don’t have the data they need, but they think they do.

Josh: Well, yes they think they do, or there is a much more complicated approach to getting good data and they’ll often start with their own customer basis, which is great. But then they understand and see the complexities, particularly in financial services businesses, of actually gathering data that is good and meaningful, and helpful when they’re trying to make product choices, customer engagement choices, choices that are centered around growing a business. Which is not to say that it can’t be done and that a lot of firms aren’t doing great, great work. There’s certainly a place for building data lakes and widespread kinds of data analytics programs. But the day to day executive and manager can make use of other types of data to make better choices as well. We were engaged by one of the large banks in Canada’s wealth management business back in 2014 in one of our earlier projects to help them assess the market from a perspective of robo-advice and what digital wealth looks like.

Josh: And in that work, doing a competitive scan and doing a market assessment, we were surprised to see how little data was available. There was certainly the, I would say, veiled research that was saying things like “robo-advice is going to eat every millennial dollar from here to kingdom come”, which begs the question, is your age, for instance, the driving factor in your propensity to want to consume wealth management in a certain way or not? And I was stricken by how our clients were getting ready to make fairly sizable capital, investment choices, based on hearsay, and not a lot of instinct, and in a lot of hoopla, but not on real meaningful data. And so while they were starting to get keen on doing some consumer research, we felt like there was an opportunity to actually study a market that was in the beginning stages of some significant change. And that’s the wealth management business on the whole.

Are RoboAdvisors Getting Any Traction?

Craig: So let me throw this out there, do you think robos are getting any traction? Most of the assets are at Vanguard and Schwab.

Josh: Yeah. And I mean, Vanguard would argue that it’s not a robo.

Craig: Well, it’s a call center, USAA had this in 2011. It was just for their clients, but they weren’t pushing it like Vanguard is, and I saw that the total number in terms of the robo market is not even 600 billion.

Josh: Yeah. So the answer is easy. No, they’re not gaining traction, and I think there’s a lot of reasons for that that we should probably talk about. And that doesn’t mean that they or some of them won’t get traction, but our research shows this, so I should just step back and say that out of that, we decided to start studying this marketplace from a consumer perspective and so have built out a research program to help executives understand, for instance, why aren’t they getting traction to a robo that they’ve launched or how might they engage customers more? What’s going on and how are things changing?

Josh: Cause at the end of the day, Craig, there is very little awareness about wealth management on the whole when you think about the average consumer walking around. And while the technology is fantastic and so far as it has somewhat commoditized, the ability for the average person to get pretty good, pretty sophisticated wealth management service in the form of a diversified portfolio that’s aligned to their risk tolerance, and that’s rebalanced for them. It doesn’t matter if you don’t have 250 or 500,000 or more to invest. The trouble is nobody has a clue.

Craig: Right, so if they’re not getting any traction, there’s not a lot of assets going to what would be considered traditional robos. My opinion is that they’re all going to fail and that they’re just going to plateau in the assets they have. And the new type of focus of these firms, the micro savings from Acorns and Stash and firms that didn’t start out with wealth like Moneylion are going to be the winners here. What do you think of that?

Josh: I think it’s a decent assertion. I think to say that the robo space is a failure though is not black and white. I think the evolution of a category, particularly from a nascent stage like this, goes through these ebbs and flows and changes and pivots and movements. And I think that along the way, firms have learned, and some have not, and learning is ongoing. So you see larger incumbent firms putting out “digital advice services” or a “robo” if you want to use that term (which is not a good term), but, what you see are just digital distributions of product which is a bit confusing to the average consumer. And then those are counter to a firm like Betterment who actually offer advice and have an open architecture from a product perspective. So the consumer should feel there’s more transparency about what’s in their portfolios. Maybe they’re a little bit more elegant in how they choose to try to engage with customers, but you’re quite right.

Josh: Then you see firms that took another tack, which was to not focus on the investing at all, and talk about micro savings and attack a behavioral angle on consumers, and that seems to be working in spades. And I give them, particularly Acorns and Stash, a great deal of credit for what they’re doing. I think in our research we built algorithms into social media, which is less scientific, but is a nice proxy for measuring a variety of things. And we see in the U.S. over the last six months, Acorns is absolutely dominant on Twitter in terms of driving impressions amongst consumers, not a single incumbent makes the top 10. I think JP Morgan jumped in into the top eight for one month when they launched YouInvest, right?

Craig: And that’s my point, if you look at what Betterment and Wealthfront, they’re the best known, so they’ve got 400, 500,000 users each, whereas Acorns has got a five million users, a billion dollar valuation and actually make sales versus just being a nice little online RIA.

Josh: There’s no doubt, and there will be a great deal of consolidation, over time. And I think we do a pretty good job of using data to see what actually matters to consumers to help firms think about it perhaps a little bit differently than they are. Because one of the big problems, Craig, I think and I hope you agree, financial services companies are pretty crappy at coming to market and engaging customers.

Craig: I’m going to disagree just on principle.

Josh: Fair enough. But if you asked the average person to look at an investment product from JP Morgan versus a credit offer from JP Morgan versus their YouInvest digital advice service, the average consumer would be very hard pressed to tell you the difference between any of those three. And that’s largely because of the language that they use, the way that they come to market with certain types of products and services. Jargon filled, impossible to understand what it means for you. So there’s lots of work to be done there because consumers just don’t engage with financial services and particularly wealth management, in those ways. Tons of work to be done. Consolidation, I was going to say, has to happen. There’s so many offers in the United States, well over 40, and that creates this confusion or category confusion amongst firms. Betterment’s doing something, there’s Wellfront, there’s something called Acorns, something YouInvest from JP Morgan.

Craig: That’s the point I was making, so let me throw this other theory at you that all robos will fail. Not Acorns, Stash and Moneylion because they’re selling investing, and most consumers don’t want to buy investing. They hate investing. They don’t want to talk about it. We’re in the industry, we talk about it every day. Most consumers are either afraid of it, or they don’t care about it, or they’re not interested.

Josh: Well it’s probably more that they don’t understand it and they’re unaware of it. And if they have a passive awareness to something that also creates anxiety because of course intuitively we know we should be saving. But that is so far away from our consideration in terms of engagement.

Craig: It’s anxiety and if you’re selling anxiety, no one wants to buy that, or a very small percentage of the population wants that.

Josh: So then the question becomes how do firms engage with consumers in ways that are not anxiety driven and are easy, and are frictionless, and reduce that anxiety and allow a delightful experience that is driving better behaviors by the average person? And that has not happened yet, but Acorns is doing a great job at starting.

Starting With Lending

Craig: MoneyLion is coming from a lending point of view, saying, “Hey, we’ll lend you some money. You don’t need to fill out a form. Just just prove who you are, we’ll lend you 500 bucks”.

Josh: Sure. And so by doing similar things on student loans and so on and so forth.

Craig: Yeah, and SoFi with student loans. They’re coming at it from different angles, whereas Moneylion came at it from a lending view and now they’re doing wealth. Whereas Acorns came at it from a budgeting, saving point of view and now they’re doing wealth. And SoFi came at it from a student loan point of view and now they’re doing wealth. I think the firms that are not attacking wealth directly but indirectly are going to be the ones who succeed.

Josh: And then there’s the incumbents with the brand power. I think there’s work to be done there. They all score the highest in terms of kind of relative preference for quotes, digital wealth advice brand in the United States and in Canada as well. And you’d see firms like Stash or, like Acorns actually do quite well amongst the upstarts, but still well below grade core portfolios or Schwab Intelligent Portfolios, or Morgan Stanley. Do those firms do consumers or themselves as a disservice by simply offering their own product? How does that integrate with the full spectrum of how we deliver wealth management to consumers?

Josh: They say, “Oh, here’s our digital thing. It’s for those older millennials”, and if they had our research, they wouldn’t think it this way, but there’s some argument that we need to have a digital product for millennial demographic, and it just doesn’t jive. So maybe they don’t care. They haven’t invested that much. And maybe there’s some foundation down the line. They can evolve. If this was to become a movement, by then it’ll be too late, because as you say, Acorns, will have already gathered all of those customers.

Craig: Right, between Acorn, Stash, and MoneyLion it’s 12 million users. And while their average account size is very low, under $500, that’s going to change, and people would look at a robo advice or digital advice channels. There’s a lottery ticket for advisors. They’ll bring in a lot of these small accounts and hopefully one 1% of them will, will have enough assets to meet the advisor’s minimums. But Acorns with 5 million users, if they get 1% that’s, 50,000, $250,000 clients.

Josh: Yes indeed. And further, they’re garnering a deeper relationship, that, as you can see, is extending certainly beyond just the wealth components, right? And competing with large incumbents across service lines. So we’ll see. Right now, brand power or brand notoriety, matters. So they certainly look more like a fintech and a lot less like financial services.

Craig: If 1% of Acorns 5 million clients hit, you’ll reach the $250,000 threshold, which I’m just pulling out arbitrarily, has a lot of advisors minimums. 50,000 times two hundred fifty thousand twelve billion, twelve and a half billion. Yup. That’s probably a pretty decent return. They only have $1 billion now.

Josh: Well, in what other ways can they monetize on 5 million customers? Forget that you’ve just talked to them about 1%, who can accrue 250k, which is not difficult. Especially if you’re providing a delightful, frictionless experience, whic is presumably behavior-drive. Presumably, you’re going to affect that percentage at 1% to a greater degree and maybe 2% of people achieve that because they just start doing better things financially for themselves.

Why Traditional Advisors Fail at Client Engagement

Craig: Okay, that’s an excellent point. So you mentioned behavior. That’s exactly what I want to talk about next. So here’s the thing, why I think robos will fail. And also it’s a limitation on existing traditional advisors. Advisors’ digital channels in the past have been their portal. That’s been the way their clients interact with them digitally. And if we see a client logging into the portal every day, something’s wrong, right? So you call them, “Hey, are you okay? Are you worried about the market? What’s going on?” So in fact, there’s no other business in the world where you don’t want your clients to interact with you more than a couple times a year.

Josh: So I would push back on that. I understand, I know exactly what you mean. I just think that needs to be turned on its head a little bit. And it should be that they need to figure out different or better ways to interact with their customers more often. That isn’t about, “Hey, what are you worried about?” So I understand that the ethos of your comment, and I agree with it, but I think that as a sidebar, that needs to change if those traditional advisors are going to do well over time.

Craig: And you’re exactly right. Now I just spoke to a room full of broker-dealers last week and I said exactly that and they were all kind of nodding their heads, but here’s the issue: Acorns has figured it out, right? And MoneyLion is figured out. They encourage you to log on every day. And Acorns has their affinity program, it’s basically a cash back program if you buy stuff through them, the firms they partner with give you deposit $10, $20 into your savings account. So that encourages you to interact with the app on a regular basis. MoneyLion, you pay $30/month to be part of their service, and then every day you log in and flip through their learning flash cards, they give you back a dollar.

Josh: It’s amazing. And they’ve caught on about all kinds of savings investment services being offered. And they’re doing it in an innovative way. They’re educating their customers, they’re finding cool ways to interact with them, that empowered them.

Craig: But don’t you see that that’s a better way? That type of interaction, building a tremendous loyalty in a community that no advisor, no robo could ever match with the way they’re selling their business, not with their current business model of, “Hey, we’re investing. Come look at your portfolio”.

Josh: I see your point, I see your point. Just the diversification of an Acorns platform versus a standard kind of investing platform.

Craig: Because some of your research is awesome. You have them in your Digital Wealth Advice Overview 2018, you’ve got a page “Which service features are driving loyalty amongst U.S. users?”, the number one was “Availability of an advisor” at 13%.

Josh: We’ve updated that research for 2019, I’m so sorry Craig. It just came out last, I think two weeks ago. I will send it over to you immediately.

Craig: I’d advise everyone to sign up immediately.

Josh: That’s it. Well this is good though, that you have that in front of you and I’ve already forgotten that. And now I’m looking at 2019 so we can do a compare and contrast.

Craig: So tell me a comparison. What’s the top driver of overall satisfaction of robos? Of U.S. users?

Josh: So I’ve switched it a little bit. Relative importance of digital wealth advice features in the U.S. is initial investment requirement is number one, brand is number two and fee is number three. So, not surprising, but what is interesting is that advisor support is less than half as important, as having a high yield savings account, less than two thirds as important as initial investment requirements.

Craig: That’s a real eye opener that it doesn’t matter what portfolios you offer, doesn’t matter what investments you put into it. They just care about what’s my initial investment?

Josh: And it makes sense because it’s not just what they care about. There are other elements that are important, but the biggest one right now, and it’s not surprising, is that initial investment part because people don’t know what they’re doing. And so to go and plunk down $50,000, in the case of Vanguard is a major friction point.

Craig: They only want to dip their toe in the water.

Josh: Yeah. And there’s a lot of incumbent executives that will say, “Well, we don’t want those customers cause they’re not going to be valuable”, and so on and so forth. And I say well, maybe that is the case. I mean, let’s find some data and let’s actually study whether that assertion is correct on the counter to that as we already know, nobody knows about investing, and you have an a capability to provide an investing service to anybody, why would you want to create friction for them to engage with you? (They don’t know.) So why don’t we instead remove friction and then delight them? A la on Acorns’ approach. Acorns doesn’t care if the average account size is like a hundred bucks.

Craig: No, the opposite. And I talked to the COO a little about this. Their average account size is $400.

Josh: There you go. And they don’t care right now.

Craig: Any broker dealer, any advisor would laugh at that, like you’re insane. But yet they’ve got 5 million users, and correct me if I’m wrong here, but consumers don’t know what a basis point is.

Josh: No, they do not. You’re right. They don’t know. They don’t know what a diversified portfolio is. Basically, every bit of language that you largely see. Betterment is much better at this. Wealthsimple is out of Canada, but it is also available in the U.S. And U.K., are probably the best, from a savings and investing perspective. But the majority trump it out. All this kind of, you know, portfolio language and diversification and, you know, robo, just terms that do not endear themselves to the average consumer at all.

Craig: Yeah. It goes over their heads.

Josh: Way over. If anything, it actually puts them off.

Craig: And that’s my point that they don’t understand. So what Acorns does is a dollar a month. Everyone knows what a dollar is.

Josh: Yup. And they made shrewd partnerships, the CNBC partnership of Invest in You, massive success and huge reach. They use celebrity in a tremendous way, which was a bit fortuitous for them in the beginning with I think Ashton Kutcher as an early investor, and he has a massive following and he would start tweeting about Acorns and boom, there’s some interest and driving awareness and it’s extended.

Craig: Well, the people don’t realize is that a dollar a month is $12 a year, $12 a year divided by $400 is 300 basis points. No one, only the biggest, wirehouse advisor can charge that.

Josh: Fair, fair.

Craig: Only the greediest wirehouse adviser is going to charge 300 basis points and they’re charging it across 5 million users. And I asked them, “How can you charge that much?” His answer was basically “Because we can and because no one else wants these accounts”, and they built their own broker dealer to scale and support these small accounts.

Josh: Yep. And you see incumbent firms doing that. In fact, that was the driving strategy of a number of big incumbents to build a robo offer to offload low, low value accounts.

Craig: Right. But these are really low, super low.

Craig: I want to take a little break from this episode to talk to you about one of my favorite sponsors, the Invest in Others Foundation. Invest in Others is a non-profit, you can find them at investinothers.org. They look to raise money and give out awards to charities that are sponsored by financial advisors, so it’s financial advisors’ favorite charities and charities that they spend a lot of time supporting. Invest in Others looks to get sponsorships from the industry and funnel that money to advisors’ favorite charities. I like this non-profit, I think you should take a look at it. Again, that’s investinothers.org. They have a couple other programs: one is a Grants for Good program, delivering money to different needy organizations and needy groups. They’re also starting a corporate awards program, which is going to be a little bit different but still within the industry and another way for financial services and wealth management corporations to help donate money to people in need. I like Invest in Others, I think you should take a look at them at investinothers.org.

What is a Roboadvisor?

Craig: So, another question I wanted to ask you now that I have you here, you talked about 40 robos. How do you define a robo? Is that only standalone firms like Betterment, Wealthfront, or are you also including JP Morgan’s digital wealth?

Josh: We do. So we define it as a digitally led, invest in wealth management or wealth advice service. Tt doesn’t mean pure robo, and most of the firms provide some access to advise or support in some format of customer support, what have you. It sort of needs to be a digitally led, offer.

Craig: So another thing you mentioned was fees. So when we talk about fees on there, they seem to be a driver, but if they don’t, if the consumers don’t understand what the fee is, how can they compare?

Josh: Very good point. They think about it on the top line of that. But you’re right. And again, when you’re in, you’re talking about a, spot on a customer journey, whereas our researchers are looking at all customers so they’ll all have a different lens through which they’re assessing. But you’re quite right. There is a lack of understanding around fees for sure, and so the more that do better to make more transparent what those fees are, and what the overall cost is, and what that impact is for a consumer interaction, the better. Because we see that transparency as another component in the equation that consumers care about.

Craig: Cool. So, we kept to all the things I wanted to talk about because we’d go into the weeds and we can’t come out. A couple of things- in your digital wealth advice research, you talk about the psychographic makeup of consumers. Can you explain how you came up with that and how you came up with your segment names and why that’s important?

Josh: So, financial services, has forever loved to segment customers on demographic lines. I mean everybody loves to do that, although other categories have evolved in how they think about it. And I think this extends into financial services, but only recently. So, you know, you heard wave, go back to 2011, 12, 13, 14. We’re robo for the millennials and traditional is for 500,000 or above and so on. When we think about the evolution of wealth management though, and I really do view it as a spectrum, I think there’s a place for all these different kinds and ways, that one can interact with a firm for their wealth needs.

Josh: We’ve got to think about, how people cluster and lend themselves to one area in other, traditional versus a digitally led service. And so we do psychographic or attitudinal customer segmentation where we have a series of about 29 kinds of statements that we use to cluster individuals on. Things like, “are you comfortable doing financial transactions online?”, “Do you like to gather information about savings and investing online?” A series of statements like that that help us categorize people by whether we believe them to behaviorally have that lens better to engaging with a digital wealth advice service versus maybe a traditional advisor.

Craig: So how can I use this to feed my AI? If I’m a robo platform, I want to use these psychographics.

Josh: So what we do is we build a target demographic, or target segmentation, target segments out of that segmentation. So if you are a digital advice business owner – and we’ve identified that in the U.S. a little over 50%, of the investing age population does in fact behaviorally lend themselves well to engagement with a digital advice platform – but what you’ll do is you’ll then unpack those behavioral segments into their demographic components, and you’ll see, in a target segment, I think we had a two four-segment solutions that top two were deemed to be targets for a digital wealth business. If you look at the age breakdowns, it won’t be highly skewed to millennials.

Josh: For instance, it will be maybe 39 or 40% of them have that behavior, top segment. Top target segment might be millennials, but then you’ll see another 30% or so the Gen-Xers and then even another, 20, 25% be baby boomers. So what does that mean? I mean, that’s just on age and we cut that. You can cut that every which way for assets, education, income and so on. But you can see that there are a big group of people who are behaviorally similar in so far as that it’s likely that they would be open to engaging with the wealth of this way, but they have their different people. So the one size fit all kind of approach to engagement won’t work, or at least it won’t work as well as you’d like it to work, right?

Josh: So it allows you to be much more precise about how you want to engage with customers. You’re going to know of this target, these people are the same behaviorally, but they’re not going to be the same as people. A millennial is going to be very different and going to be in different places than a, a baby boomer will be. So you can massage and manage your messaging, where you market it, how you market it, what kind of experience you provide to those people a little bit in more finer detail.

Craig: So do you have any data? What I think will be interesting is to know of the robos, which ones make up most of their customers? Are certain robos more attractive to passive players or confused warriors or skeptical savers?

Josh: What’s the top one? I don’t have it in front of me. You’re advantaged, you’re advantaged Craig.

Craig: I have, I’m in control. I’ve got, engaged asset accumulators.

Josh: Yeah, so those guys are going to be way more propensive towards an advice platform. They’ll also play in, in a self-directed capacity.

Craig: Because they seem engaged. And accumulators seem like the ones who would go to Vanguard or Betterment.

Josh: If they’re comfortable online, they want to invest. They don’t fear investing, they prefer investing over saving, they’re pretty knowledgeable about their financial situation. They’re not worried, and so on. So those guys are our sort of slammed dogs in Canada. We call that category or that segment. The slam dunk digitals as well. That’s a no brainer, a no brainer and shouldn’t be.

Craig: They prefer saving to investing comfortable handling finances without advice. That seems like an Acorns customer.

Josh: It is. And Acorns can do well. And the interesting thing Craig, about these segments is that they change over time so people can move and we’ll move into different categories or segments. And so when we do this in our research, we do this annually, you see one segment from others. And I think in this past year we did see the passive players drawing from the confused worriers.

Craig: Worriers confused by wealth management offers worried about financial future, not comfortable making financial transactions online.

Josh: Yeah. So not a target segment, right. By a digital wealth advice firm. Passive players I think was the one that drew from that segment and grew a little bit. So that means awareness. Awareness is growing, they’re getting a little more comfortable, they’re learning a bit more and therefore becoming more likely to be someone that could engage.

Acorns is Killing It

Craig: Yeah. But I think all three of these bottom ones, the passive players occurring fused warriors and the skeptical savers are all Acorns targets and Acorns is killing it online.

Josh: Yeah. I mean bearing in mind, that’s on Twitter and it’s not to say that the Twitter population is representative of investing age Americans or Canadians for that matter, but it’s certainly a great proxy to see. At the end of the day, these are offers that are existing in digital. If you’re a traditional wealth firm, or a digital led wealth firm, if you’re not playing in the digital channel, that’s such an opportunity lost in my view. Because it’s a great medium to drive awareness in what is a pretty low awareness category. Certainly amongst people who would purport to be highly aware, that’s a very low number. It’s less than 10% in the U.S., and imagine a consumer’s consideration set to enter into their consideration to buy or engage. They have to be aware, especially for a wealth management service offer in that category. And so Acorns is doing a tremendous job and the others are not. Stash has done some good work, Ellevest has done some, some good work, although their messages is not resonating very well.

Craig: Why not? Why do you think Ellevest’s messages not resonating?

Josh: So in our latest research, we did a study on relative preference for digital wealth advice brands in the U.S. and Ellevest and its relative preference. It’s the least preferred of the brands that we track, in entire category. And I was a little bit surprised by that because they do have, some good marketing in digital, so I thought, well, maybe it just doesn’t resonate amongst the male demographic, but surely, its whole ethos was around the female demographic. Surely there’s going to be some positive story there. And in fact, Craig, surprisingly not resonating at all amongst both males or females, which is unfortunate for them. And I think they have some work to do. But it also points to the power of brand. I mean, they’re an upstart brand. We have the top of the charter E-Trade core portfolios, Schwab’s Intelligent Portfolios, Morgan Stanley, Fidelity, the big names, TD Ameritrade, Merrill Lynch, JP Morgan, Acorns, is the number one upstart, we’ll call it upstart firm. And it comes in *just* below JP Morgan chase. I call it a tie. So great work by them frankly. And then you don’t see another one until Stash, which is slightly on the negative side of the ledger in fact.

The Advisor Effect

Craig: Interesting. Okay. So running out of time here, I want to get a couple more questions. Can you explain what is the advisor effect?

Josh: Oh, the advisor effect. So we found that we want to study the category wealth management and not just digital advice, not just self-directed, or online brokerage. What about people who are engaged in traditional advice, who make up the majority of the assets, in the wealth business? And so what are the interesting things we can glean about folks that are engaged with the traditional advisor, that might be relevant. When you look at the whole category, when you look at digital advice, when you look at self-directed, we found and we continue to see those folks that are engaged by a traditional advisor are much more aware of digital life, wealth advice, alternatives, are much more likely to be a user of a digital wealth advice alternative and actually are also more satisfied than their, non-traditionally, advised counterparts, in the digital wealth advice experience.

Josh: So what does that tell me? It tells me, if you’re a digital wealth, if you’re already engaged in wealth management, you already by definition have at least a little more awareness of what wealth management is, what’s kind of available to you. You have some experience with it in at least in the traditional sense. So you are likely more open to looking at alternatives and looking at what’s going on, what’s out there. And so we see a little bit of shopping behavior, right? That sort of falls out from that increased awareness. So they’re going and trying out, a Betterment, or an Acorns or pick any of them. They’re obviously not moving all their assets yet, but in the experience that they are having, it’s pretty good. More if they’re more satisfied, and satisfaction numbers are quite high for the whole category, which is good and not, I mean, compare it to a traditional advice experience. Maybe you meet an advisor once a year, you can’t, I mean, I look at my own, I can’t even check my holdings on my phone. I can see my account balances, and I’m with a big wire house. I cannot see my holdings. That’s insane to me.

Craig: So are you saying that clients have traditional advisors are more likely to try out a robo because they are aware?

Josh: They are absolutely. They try it. They like it. If those firms can do more about building comfort, building, building trust, and delighting and having a frictionless experience, I wonder, like you saw in ’08, you saw a flood of assets rush to online brokerage. What’s the next catalyst for a rush out, who knows? I wish I had a crystal ball and maybe there’s a 30% correction around the door, around the corner. Maybe it’s going to be to self-directed and to a digital advice platform, but there are also other ways to move the needle than needing a catalyst. And I think that’s the takeaway for me is that firms of all sizes and shapes need to focus on consumers and understanding of what they’re actually trying to sell.

Craig: Yeah. The more that advisors educate their clients, the more likely they are to move to a robo.

Josh: I wouldn’t put it that way. I would say that just the fact that someone is engaged in attritional advice, a relationship already infers that they have some additional awareness. They’re engaged by the wealth management category. The majority of people are not right yet.

Craig: Excellent. Josh, this has been super enlightening. I mean, we can talk about this stuff all day as we have.

Josh: Well, we do usually. Yes. Yes.

Craig: Well that again, and I appreciate you spending the time and going through all this. And then I encourage everyone to look up a Parameter Insights and their research. It’s fantastic. I go through all the time and so tell me, how can people best contact you?

Josh: reach out to me at josh@parameterinsights.com. Check out our website, www.parameterinsights.com you can add your email, you can check out a sample of our data, see what we do. Josh pretend and LinkedIn, pretty active in there as well. And Reverend sites has pages to come see us. We’d love to talk wealth management and consumers and growth.

Craig: And who wouldn’t want to talk about that?

Josh: What’s that?

Craig: Who wouldn’t want to talk about that?

Josh: I mean if you want to grow a wealth business, you should because it’s more and more competitive, and there’s lots of reasons that you can’t win.

Craig: There are lots of reasons, and I would encourage everyone to reach out to Parameter Insights and check out their wealthtech research and advisory service on digital advice. Their 2019 series is available on their websites parameterinsights.com and @JoshBook10 on Twitter.

Josh: Thank you sir.

Craig: Thank you Josh. You’ve been awesome. Awesome.

Josh: Great to be with you buddy.