wealth management technology

Everything You Missed from the InvestWest Conference 2019

There’s something to be said for holding a conference in the Bay Area. It’s much easier for the best and brightest of Silicon Valley to stop by and share a few words of wisdom.  This was the second year of the Invest West Conference and it didn’t disappoint with wealth management industry stars such as Wealthfront’s CEO Andy Rachleff, Betterment’s CEO Jon Stein and the COO of Acorns, Manning Field.

Where is an Advisor’s Value Added?

I’ve been flagging this horse for 4+ years now, but it’s hard to get anyone to pay attention.  Even with all of the conference sessions and media screaming about how investment management is becoming commoditized and robo-advisors are offering baskets of ETFs for next to nothing, assets keep flowing in the wrong direction.

Assets in Rep-as-PM (RPM) programs have increased 34% in the past two years to over $1.5 trillion, according to Cerulli.  A lot of this can be attributed to the market but it doesn’t show any serious shift towards planning-led advice, home office models or TAMPs.

And the evidence has shown that advisors are not very good at building portfolios, either. At least not as good as dedicated asset managers or home offices. Yet no IBD will ever stop advisors from going RPM because they need their assets. Shouldn’t this become a compliance issue at some point? (See Advisor-Managed Portfolios Knocked Out by Home Office Performance – Cerulli)


It’s crystal clear after hearing from three of the top robo-advisors that they’ve moved on from investing and are now focused squarely on banking.  Everyone of them said that providing banking services was now their most important goal.  Most likely due to the low profit margins they’re eeking out from their 25 bps asset-based fee, they have all expanded into the same adjacent space.


Andy Rachleff CEO of digital advice provider Wealthfront (I never liked the term robo-advisor) has been on a public relations tour lately. He was the lead-off speaker at In|Vest and shared his vision for what I’m referring to as Weathfront’s Latest Pivot. There was definitely a marketing spin being communicated and he was very careful to stress the following points:

  • Wealthfront did not see an outflow of assets during the 2018 downturn, but many customers reduced their add-on deposits.  This was one of the concerns many Robo skeptics had about their clients loyalty to them.
  • Out of 90 million Millennials (25-40), Wealthfront is targeting the 20 million that are classified as savers since they are in the accumulation phase and more likely to grow their account.
  • 90% of Wealthfront clients are under 40 and they actively try to discourage older customers *out* of using their service; they’re more expensive to keep since their more likely to call the support line

This was an interesting take on the benefits of artificial intelligence in wealth management from the CEO of a company that wants to be considered a leader in technology rather than just an online RIA.

According to a survey by Deloitte, 60% of frontrunner financial services firms are defining AI success by improvements to revenue and 47% by improving customer experience. Frontrunners are defined as those firms that gain the greatest financial returns from their technology implementations versus their peers. So, which one does Rachleff see Wealthfront fitting into? Shouldn’t they be exploring the benefits of AI for their clients? (See 8 Amazing Updates on the AI Digital Marathon in Wealth Management)

I’m hearing this as a pitch to diversify away from being a wealth-only firm and expanding into banking services.  It’s also a terrific marketing term.  This is recent trend of robo-advisors and investing apps all moving quickly into banking is an indication that they’re realizing they can’t generate enough revenue from asset management fees alone because they have driven fees so far down.  They need additional revenue sources and more cash to grease their internal systems.

Client acquisition costs are also eating these firms from the inside out and killing profitability.  A recent Morningstar report stated that customer acquisition costs (CAC) for B2C roboadvisors, such as Betterment and Wealthfront, were $300 per gross new account and $1,000 per net new account, just in marketing alone. That means pulling in $10 billion in assets costs them around $200 million. Even if they reach the point of profitability, with their low operating margins, “the payback period on advertising costs can be more than a decade,” the report noted.

While Rachleff did state that 50% of their customers come from word of mouth, but they need to keep growing and he didn’t mention what their churn rate is.

There are 180 million people in the US with a bank account and 30% of them never go to a branch, which is where Rachleff got his 50 million target customers. He didn’t cite his source and I couldn’t find these numbers online anywhere. What I did find was a 2018 Fiserv survey, where 52% of bank customers visited a brick-and-mortar branch within the past month and 80% in the past six months. So, that would drop Rachleff’s target market down to 36 million, still a sizable number.

Rachleff went hard on the legacy banks and painted a picture of a market that is stagnant and ripe for disruption.  “Banks run their businesses for their shareholders, not their customers — this holds them back,” he suggested. He may not want to admit it, but he runs his firm for the venture capitalists who staked the money to get Wealthfront started and fund their continuing money-losing operations. At some point, those VCs will want to cash out.

More bank bashing from Rachleff: “Banking is one of two industries with negative net promoter scores, cable is the other.”  While this sounds terrible, I can turn this around using something I heard Rachleff say on a podcast recently. “At the height of Facebook’s growth, their NetPromotor Score was -14. So it’s not always a good indicator of success.”  (See 3 Reasons High Net Worth Clients Are Driving Banks to Expand Digital Advice)

Funny that Rachleff didn’t mention his foray into active management with their ill-fated Risk Parity Fund, which generated a storm of controversy when investors realized that expenses could be as high as 125 bps.  Wealthfront dropped their fees on the fund to try and quiet the outcry.

Wealthfront wants clients that other financial services firms don’t want, explained Rachleff, those under 40 with less than $1 million in liquid assets that want to delegate management of their finances to an automated service. I’m not so sure that no one else wants those clients. I think Vanguard, Schwab, Personal Capital and Betterment are all looking for those clients as well.

“Not all Millennials are smoking pot and living in their parents’ basements,” Rachleff insisted. Some have jobs and want to save, which are the ones Wealthfront wants to bring in as clients. Does pot smoking automatically mean you don’t want to save?

Rachleff couldn’t stop needling the banking industry even as his firm is partnering with some of the biggest banks in the country for their Deposit Sweep Program that provides FDIC insurance to Wealthfront’s  banking clients.  Hopefully, no executives from Citibank, State Street, Wells Fargo or the six other banks were in the audience.
Wealthfront clients have connected an average of 6.25 external accounts – this provides valuable insights into their financial lives, assuming the firm is spending the time and money to do the analysis. This could be leveraged by their Self-Driving Money idea, if they can build the proper connectivity.

Be obsessed with where your firm is going and how to solve client pain points rather than beating the competition today, Rachleff stated. I heard something similar from Simon Sinek at the Pershing conference. (See 14 of the Absolute Best Ideas From Pershing INSITE 2019)

Building trust with customers will get them to sign up for direct deposit Rachleff noted. And everyone knows that where a customer has their direct deposit is where they consider their primary bank relationship.  Every other account becomes secondary.


Acorns COO Manning Field stopped by to give an update on their progress in dominating the wealth management business. He explained that 182 million Americans make under $100K — these are their core target customers.

My theory is that the future of wealth management belongs to mobile apps like Acorns, Stash and MoneyLion. But why? Why won’t Wealthfront or Betterment take over and disrupt the industry and become the dominant player in the advice space?

Because Wealthfront has 250,000 accounts while Acorns has over 6 million! Acorns is in a much strong position to monetize their user base and become an absolute beast in wealth management.  (See Why Acorns is the Only Roboadvisor That Could Be Worth $1 Billion)

Wealthfront’s Rachleff was talking a big game about how his firm is in a position to upend legacy banks. But he doesn’t have the results to back up his words. Sure, they attracted $1 billion by offering ridiculously high interest rates on a money market account. But buying hot money clients like these is not a long-term acquisition strategy. Those same clients will bolt as soon as a better rate hits the Internet.

After just a year, Acorns already has more debit card customers than Wealthfront has customers!  Wealthfront will be a pimple on the butt of big banks, but Acorns is a firm they need to be concerned about.  50% of their debit card customers made Acorns their primary checking account. This means they setup their direct deposit there and that is an indication where someone banks. Wealthfront will never see these kind of numbers. (See Acorns: We’re Not Just Gathering Assets, We’re Building a Brand)

Another reason why Acorns will dominate is their expansion into cash rewards with their Found Money program.  Partnering with the biggest consumer brands and delivering cash back rewards directly into customers’ investment accounts has been wildly successful and creates a loyalty program that no other robo-advisor can match.

According to COO Field, brands participating in their Found Money program have seen an average 20 point increase in their Net Promoter Score among Acorns clients. That is incredible!  Another example of how Acorns has built a tremendously loyal base of customers.  No other robo-advisor can match that and it is going to show up in their low client churn rates in the future.  (See Comparing The Best Digital Advice “Robo-Advisor” Platforms For RIAs)


The entire day’s schedule was shifted on Friday to accommodate a last minute visit from Betterment CEO Jon Stein, who explained that he was most excited about three things:

  • Their new suite of banking services, which they have branded as Everyday
  • Their partnership with Dimensional Fund Advisors
  • Their platform for 401(k) plan sponsors

He should also be happy that they doubled the number of customers using their Betterment for Business product line, according to Stein.

In first week of their Everyday product launch, Stein claimed that they saw over $1 billion in inflows into their savings accounts, and mostly from new customers. It’s actually not a savings account, but a cash swap account that pays a higher rate of interest, according to Stein.  Digital competitor Wealthfront claimed to have also brought in $1 billion in less than two months after the launch of their high-yield account.

Their Everyday bank account has no fees at over three million ATMs world-wide, noted Stein. Hopefully, this will usher in a Race to Zero for ATM fees. I’m so tired of these!  (See Mission: Impossible – Choosing the Right Digital Advice Vendor)

Stein claimed that Betterment generates 3% more cash for their retired customers (how many of those can the possibly have?) purely through tax optimization. That number seems high to me. I’d like to see the data that backs that up. Also, how much is really just simple tax aware features like asset location and avoiding short term capital gains?

There is a statistic from the NFL called Defense-adjusted Value Over Average or DVOA, which measures how successful a defense is when compared to the league average. We need something like this for portfolio rebalancing and tax management. I’m sure that Stein is calculating that 3% versus not rebalancing and/or have absolutely no tax management. This is not a useful number unless it is compared against other companies or other rebalances. (See WealthSimple Tries to Breakout of the Canadian Market with $100 Million from Allianz)

More attacks on the rest of the bank market from Stein, including the slam, “banks are not good for America,” because they charge high fees and sell products that push people into debt.

Customers seem hungry for something different in banking, Stein claimed, although his firm hasn’t launched anything earth-shattering yet.

  • Wealthfront launched first in the high-yield savings space, with the debut of its Cash Account earlier in 2019
  • Betterment debuted their own high-yield savings account in July
  • Both accounts are fee-free, allow unlimited transfers, and offer FDIC insurance coverage on up to $1 million

Wealthfront and Betterment are not chartered as banks — although their regulatory framework is slightly different since Betterment is regulated as a broker-dealer, while Wealthfront is regulated as an RIA. (See #ItzOnWealthTech Ep 22: The Third Wave of Digital Advice with Margaret Hartigan, CEO of Marstone)

Another advantage that Betterment has over its rivals is that they’re also a custodian. I’m not sure that they’re the biggest challenger custodian or that the term challenger custodian is going to be used, but it is an option for RIAs who feel left out after the big merger. Can Betterment take advantage of this and increase their custody market share?

How to Prevent Sexual Harassment in Wealth Management

A panel on this topic has been long overdue in our industry. Major props go to SourceMedia for including this important topic on their agenda. My only question was why was it stuck as the next to last panel on Friday afternoon?

The panelists were:

  • Alex Chalekian, Founder & CEO, Lake Avenue Financial
  • Sonya Dreizler, Founder, Solutions With Sonya
  • Rachel J. Robasciotti, Principal & Wealth Manager, Robasciotti & Philipson

The moderator was Ann Marsh, Senior Editor and West Coast Bureau Chief, Financial Planning.

“Someone needed to speak up.” Alex Chalekian on why he posted his video about Ken Fisher’s offensive comments at the Tiburon Conference.  Fisher’s asset management firm has seen outflows of almost $3 billion after his comments.  Goldman Sachs recently pulled their money from Fisher Investments.

Lawyers for both employers and employees say simply banning NDAs would not be good policy. Some victims want the details to remain confidential, and forcing disclosure could lead to fewer, smaller settlements. However, bills banning NDAs in sexual-harassment settlements have been proposed in the state legislatures of New York, California, and Pennsylvania, according to Wired.

Besides NDAs, there’s a certain degree of victim blaming that underlies the culture of secrecy keeping people from speaking up about sexual assaults and harassment in our industry, Robasciotti explained. New research published in the journal Psychology of Women Quarterlyfound that blaming sexual harassment victims is linked to empathy for male perpetrators. Both male and female participants reported equal empathy for the female victim, but men were more likely to show greater empathy for male perpetrators, and this, the researchers concluded, led to be more victim blaming.

For companies that still require NDAs, mediators are required to negotiate a settlement in harassment cases.  A recent American Bar Association article, When Confidentiality And Transparency Collide, discussed the conflict when a company mediator observes a pattern across multiple cases:

But what happens to that comfort if we are called upon to mediate a series of disputes against the same employer, prompted by multiple claimants who allege that the company’s powerful leaders have repeatedly taken sexual advantage of the young women who work for them? When many allegations are repeated against the same bosses, is the duty of confidentiality stronger than an individual’s personal sense of moral duty to disclose ongoing harm? It is noteworthy that, as a general principle in cases involving allegations about workplace misconduct, the individual alleged perpetrator is seldom present at the mediation, but the company and its lawyers (and often times insurance carriers) are there to do “damage control” and settle these matters before they become public.

Companies that require forced arbitration become allied with the sexual harassers against their victims, Robasciotti stated, and the victims can then never legally speak out about their abuse.  Some stats from The Employee Rights Advocacy Institute:

  • 70% of individuals who experience sexual harassment at work never report it
  • 75% of employees who spoke up about workplace mistreatment experienced some form of retaliation (probably a driver for the stat above)
  • 60 million non-union employees are subject to forced arbitration

The best thing we can do is to listen to people whose experiences aren’t the same as our own, Dreizler advised.

For male advisors who run a small firm and think that their attitude towards women won’t impact their business, Chalekian had some words of warning. Women who become responsible for their family’s wealth after becoming widows will fire their male financial advisors if they didn’t respect them while their husbands were alive, he said.

Client Experience / Advisor Experience

I like when the conferences divide up the break out sessions into different tracks:

  • Market Transformation
  • Masters of UX, AX, & CX
  • Operational Strategy

As you can tell from the length of this section, I spent most of my time in the UX track.  But I tried to cover the other two as well.

Aligning Your Wealth Management Platform with Your Organizational Goals

This was my session with David Canter, EVP, Head of the RIA Segment, Fidelity Clearing & Custody Solutions and Mike Sha, CEO, SigFig.

Thanks, Jay!  You’re too kind.

I asked Canter how do you understand your clients’ needs?  He explained that they ask five questions:

1. What is your target market?
2. What are your capabilities?
3. How are you organized?
4. What is your technology infrastructure?
5. What’s your unfair advantage?

(See #ItzOnWealthTech Ep 17: How Advisors Can Find Their ‘Unfair Advantage’ with Tricia Haskins)

Things are looking up for financial advisors according to both Canter and Shah.  But they need to stop focusing on pushing products and more on delivering advice, as Michael Kitces correctly points out.

Edward Jones

Head of Client Experience for Edward Jones, Ilan Davidovici, prodded the audience to ask themselves what are you doing to make your processes better?

I like how Davidovici showed us their CX framework. It’s not often we get an insider’s view of the design process. The client journey is supported by the client experience map which is in turn supported by the product maps. A well-thought out framework.

Mapping out the client and advisor journeys is something that we recommend to all of our wealth management clients. You would be surprised how many firms have not spent much time thinking about this. Which is why they have a difficult time getting it right.

That’s a *lot* of Post-It Notes! Love the behind-the-scenes look into how the sausage is made.  Kudos to Davidovici for giving us a peek at how his team designs their A/X and C/X.  Some questions that he puts to his team:

  • Can you help us figure out how to prioritize our value?
  • Should we allow our clients to update their goals through the app? Or require an advisor to be involved?
  • How do we increase P&L velocity of our advisors?

eSports & The Rise of Gen Z

I never expected to hear a speaker talking about video games at a wealth management conference, but here was Julia Carreon, Managing Director of Digital & Fiduciary Operations, Wells Fargo Wealth Management telling us all about competitive gaming, also called eSports and how it’s already the next big thing.

Some eye-popping statistics about the eSports industry.  When will we hear of the first financial advisor who builds a niche catering to eSports players?

GenZ Disruption: Kids who grew up playing Angry Birds on their parent’s smartphones will become them the most demanding consumers we have ever seen, Carreon warned.

Zoomers (Gen Z ages 10-24) directly control or influence $45 billion in annual consumer spending, Carreon reported.

Besides keeping an eye on how many kids are playing Fortnite (200 million+) one of the most useful takeaways from Carreon’s talk was that advisors should engage more via video.  It’s one of the best mediums to attract younger clients, who read less and watching more, which every advisor should be looking to do.

Improving the Digital Client Acquisition Experience

Doug Fritz, President, F2 Strategy (again) spoke with Kabir Sethi, Managing Director, Head of Digital Wealth Management, Bank of America Merrill Lynch.

Digital Advice: Amazon Prime is Nothing Without the Trucks

Tony Berman, VP, Technology Products, Pershing LLC, a BNY Mellon Corporation and Simon Roy, President and CEO, Jemstep sat down with Suleman Din, Technology Editor, Financial Planning to talk more about client experience in financial services.

Delivering a compelling client experience requires well-designed integrations, in order to deliver leverage for advisors and enable improved operational efficiencies. This panel took on some tough questions including:

  • What are the set of platform integrations required to deliver a quality client digital advice experience?
  • What are the key requirements for selecting and implementing a digital advice platform to meet your client, advisor, and the home office requirements?
  • How should you structure your digital advice client life cycle to create a graduation path for clients to access the appropriate wealth management services throughout their stages of life?

How will you respond when your clients realize that they get a better user experience buying a bluetooth headset than they do managing their financial goals?

My firm has done a lot of research in the banking industry, analyzing the total addressable market, obtainable market and projected revenue for digital advice.  The opportunity is huge if only a small fraction of total deposit assets can be converted into wealth management assets.  It is he case that string connectivity is required to ensure that anti-fraud, AML/KYC and other controls are managed across channels.

Product Demos

Always interesting to see what innovative technology vendors are working on and get some ideas for my clients.

Capacity – Chatbot on Steroids

I was impressed when I saw these guys demo at Invest NYC over the summer. Incredible AI-powered technology that can become the glue to connect disparate parts of an organization together.

I’m sure they have other use cases, but I love the embedded Slack chatbot! You can type in natural language and ask a question like, “who is our primary contact at Company A?” And it pops out to the CRM and extracts the name and contact information and displays it right inside Slack for you! No need to tab switch or move between apps. You can stay in context and keep working. Every company with more than 50 employees should look into this.

Over 40 connected applications should enable most firms to get instant productivity as soon as they get the software installed.  Connections to the most popular enterprise SaaS platforms like Salesforce, Workday, Sharepoint and even Github should enable employees to quickly locate data they need no matter where it is stored across the company’s many silos.


I was not impressed by this demo. I’m certainly jaded from being in the industry so long and seeing so many similar products. Nothing they showed jumped out at me as being unique, innovative or offering advisors a way to differentiate their offerings.

Seems like just another lite financial planning tool in a sea of lite financial planning functionality being offered by almost every wealth management technology vendor.

CTO Best Practices

Doug Fritz, President of F2 Strategy, spoke with Robert Candler, Head of Digital Client Experience, Bernstein Private Wealth Management about how to avoid some of the pitfalls when you’re the CTO of a large wealth management firm.

I think every CTO tries to position their budget as an “investment” in the business rather than a line item. A CTO best practice suggested by Fritz: Build prepayments for custom development into vendor contracts so that the money is committed. Then you don’t have to go the CFO every year begging for funding for new projects! Brilliant!

CIOs report that the majority of their technology budgets are allocated to support business operations (57 percent), compared to only 26 percent to fund incremental business change and 16 percent to bolster innovation, according to Deloitte.

A danger of having young fintech partners — After a private equity acquisition, there is the innevitable brain drain that leaves you with a B-team and a vendor you’re locked into that won’t change a line of code

AdvisorTech Survey

I love data! Especially statistics that can provide a view into market trends around technology. The presenter was Suleman Din, technology editor of American Banker and Financial Planning. Follow him on Twitter at @sulemandn.

Some questions that came up on this slide were about overlap between the categories. What’s the difference between digital platforms, robo-advisors, and automated investment advice? They all sound the same to me.

This data just seemed plain wrong to me.  We review a lot of other technology surveys, and MGP is usually around 30-33% market share. This number should have tipped them off that something was wrong with the data or the participants were skewed.

If you combine Envestnet ENV Platform plus Tamarac plus Portfolio Center (now owned by Envestnet) you get 29% market share.  Probably the highest for a single vendor in a long time!  What’s hidden in that Other 13%?

Viewing Through the Lens of the Customer

Gavin Spitzner, President, Wealth Consulting Partners was the moderator for this panel of experts:
  • Cynthia Loh, CFA, VP, Digital Advice and Innovation, Charles Schwab
  • Jeff Schnitz, Head of Product & Client Experience, SVB Private Bank
  • Dasarte Yarnway, Founder & Financial Advisor, Berknell Financial Group
  • Steve Gresham, Principal, The Gresham Company, LLC

Spitzner shared a stat that 87% of high net worth investors under 40 consider digital wealth where they will go in the future vs only 48% of those over 40.

Yarnway explained that his firm was too generic in their approach to clients.  Their results improved when they began to specialize and only focus on their core target client segments.


Schwab Intelligent Portfolio recently hit $45 billion in AUM according to Loh, but only 40% of these clients are new to the firm. Based on their new subscription pricing a client with a $1 million portfolio would pay just 3.6 bps, Spitzner calculated.

Schwab uses a team-based approach that allows CFPs to focus on building their business and adding value rather than spending all of their time trying to bring in new clients, Loh explained.

The conversation turned to the use of AI and Loh stated that Schwab is building a hierarchy of events into their BigData solution to ensure that they surface the best personalized advice to clients when they most need it. Is this like Maslow’s Hierarchy of Needs?

SVB took a design-first approach to how they represent data, Schnitz reported. But they still prioritized too much on lending and deposits instead of advice. They now focus heavily on their client communities in the technology and life sciences verticals, he noted.

Mythbusters: What UHNW Investors Really Want

April Rudin, Founder and President, The Rudin Group and #1 Wealth Management Social Media Influencer, spoke with Markus Lammer, COO, UHNW, Investment Banking and Capital Markets, Credit Suisse for a fireside chat (sans fire).

ESG and impact investing are trending positive for younger generations of HNW investors.  According to a report by CNBC, an influx of young investors are leading a charge of socially responsible and sustainable investing, experts say, funneling their money into investments and projects that serve the greater good.  Morningstar reports there were 234 ETFs and mutual funds at the end of 2017 that invested in a socially responsible way, doubling since 2012

We keep hearing about how Amazon or Google is going to invade wealth management. But beyond some small moves like launching a joint checking account, nothing has materialized. Lammer believes it’s because the business is too complex for them at the moment.


Me and my British Evil Twin, Seb Dovey!  Both enjoying a delicious Green Tea Matcha at the Refinitiv booth.

2 Responses

  1. Awesome blog.
    the best line
    “Hopefully, this will usher in a Race to Zero for ATM fees. I’m so tired of these! “



The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at craig@ezragroupllc.com