Schwab's robo-platform grows AUM by 25% in 3Q
Charles Schwab's Intelligent Portfolios and Institutional Intelligent Portfolios, the custodian's robo-advisory platforms saw AUM increase by 25% to $4.1bn in 3Q. Matthew Fronczke, from consultancy firm kasina suggests that the increase is likely to have resulted from assets being transferred from existing Schwab accounts, however, Schwab spokesman, Michael Cianfrocca claims the growth was as a resulted of marketing efforts. Fronczke added that either way, the platform is likely to continue to grow AUM and expects a further $1.1bn to be added in 4Q, and pointed out that Schwab's robo-platform has gone from zero to $4.1bn in 20% of the time it took leading independent robo-advisors to get to $2bn. The firm's success is likely to prompt other established firms and startups to enter the space as it is clear that consumers are starting to engage with robo-advisors in the US. 

As the financial services industry jockeys for position in the fast-evolving world of robo-advice, Raymond James has put a stake in the ground, saying that it will not launch a robo-platform that competes with its affiliated financial advisers.

Speaking Monday in Naples, Fla., at the company’s annual Wealth Managers Conference, William Van Law, president of the Investment Advisors Division, underscored Raymond James’ commitment to independent advisers over the hottest, new distribution channel.

“You’re not going to read about Raymond James starting a robo-platform or some other business that competes with advisers,” he said.

When asked to elaborate, Mr. Van Law drew parallels between Southwest Airlines’ commitment to not charge baggage fees while much of the airline industry moved in that direction.

(More: Robo says investors want a human touch in retirement accounts)

“There are things that other firms are doing to raise fees, and we absolutely understand that there are advisers working at firms that are in the direct-to-consumer business,” he said. “It’s assumed those firms [that are offering robo-platforms to consumers] are competing with their adviser business, but we don’t do that. For us, it’s about recognizing our core business, which is servicing financial advisers.”

WHERE THE TECHNOLOGY IS

Such statements may play well to an audience of advisers who have custodial relationships with Raymond James, but there also may be no denying the trend and temptation to tap a burgeoning potential distribution channel of a retail-oriented robo-advice platform.

“I understand what they’re saying about their business being through advisers and human relationships, but firms should always accept that their function in the marketplace is a function of where the technology is and where the market cycle is,” said Matthew Fronczke, an analyst and engagement manager at research firm kasina.

Dennis Zank, Raymond James’ chief operating officer, emphasized that there is no lack of effort to expand technology and services to advisers, but that working directly with consumers through a robo-advice platform is not part of the company’s business model.

“We’re not in the place where we want to disenfranchise our relationship with our adviser clients, it’s not going to happen,” he said. “But that doesn’t mean we won’t continue to build things that will make it easier for advisers to serve their clients.”

Mr. Fronczke of kasina recognizes the historical and ongoing development of platforms that have been in place for years to enable custodians and brokerage firms to offer enhanced services to advisers for their clients. But he thinks it’s risky for Raymond James to go on record saying the company won’t be taking a robo-platform directly to consumers.

(More: Bruckenstein: Where advisers need to make technology investments today)

“I would be more comfortable if they said something along the lines of they are not going directly to consumers right now, because at one point they might realize that a robo-platform could be a good way to bring consumers to their advisers,” he said. “You never say never, because it only means you won’t do it until you do.”

Laura Varas, co-founder and partner at Hearts and Wallets, described the Raymond James comments about not planning to jump into the robo-advice game “very interesting and bold.”

“I admire their clarity,” she said. “But I believe you should never say never.”

But, according to Ms. Varas’ research, Raymond James isn’t really taking a big risk by re-confirming its support of human advisers.