The key to a good
"There is comfort in being able to speak to someone about complicated issues, even if you don't get a dedicated individual," said William Trout, director of wealth management at Javelin Strategy & Research.
Hybrid robo models are a way to scale up investment services while incorporating more holistic financial planning features into a retail bank.
"[Banks could] use this as a lever to build and expand relationships with clients rather than as a one-trick pony to grab client assets," said Trout.
To be sure, there are holdouts: Marcus Invest from
Across the country, banks of all sizes are investing in the wealth business as a way to deepen customer relationships, capture recurring revenues and tap into a massive transfer of wealth from baby boomers to Generation X and millennials. A lot of money is up for grabs, but maybe not enough to go around.
Truist, which has $548.4 billion of assets, is giving customers the option of a pure robo advisor called Truist Invest, which automatically monitors and rebalances the investments in a user's portfolio, and Truist Invest Pro, which gives robo advisor users access to a team of registered financial advisers. The service requires at least $5,000 of investable assets.
Kacy Howard, senior vice president of digital investing at Truist Wealth, delved into the robo market in 2018, when she was on the digital investing team at SunTrust and the bank was exploring its own service. She found most companies, including banks, brokerages and online robos, were offering one model to customers — a robo advisor or a hybrid robo — but not both. She also felt like some options relied too heavily on human intervention rather than an algorithm, which made them difficult to scale. Both findings informed Truist's approach when SunTrust and BB&T merged in 2019 and the new entity prepared to develop its own robo advisory.
The primary target is current Truist customers, although the service is not limited to them.
"We know we have clients investing elsewhere and we believe this offering will allow them to bring more assets to us and expand our relationship," said Howard.
Since the product launched in February 2022, Howard has noticed that Truist Invest has acquired a higher volume of new accounts, but Invest Pro has generally seen much larger balances per account.
"The folks who spend time talking with one of our advisors are more comfortable and incentivized to bring more money to us," said Howard. "That trust is inherently there when you have someone on the other end of the line listening to your story."
Ally is taking a different approach to combining digital investing with the human touch. Instead of incorporating advisors into its robo, it is offering them as a separate and more comprehensive wealth management service.
In May, the $188.6 billion-asset bank introduced a fiduciary advisor-driven wealth management function under its Ally Invest umbrella, which also includes a robo advisor and self-directed trading. In Javelin's 2022 survey of 1,538 U.S. investors with $250,000 or more in investable assets, 26% reported that they had an automated investing account at Ally.
The portfolios in Ally's wealth management service are automatically managed and rebalanced. Ally built most of the technology for wealth management in-house but also turned to vendors. It uses a turnkey asset management program from Orion Portfolio Solutions for trading, rebalancing, compliance management reporting and more, as well as Plaid for account aggregation, so advisors can see a fuller picture of their clients' finances by aggregating 401(k)s, loans and other external accounts.
The initial conversation between an advisor and a client starts with the same question: What is your first memory of money?
"Money can be a joyful thing or a stressful thing," said Lori Spangard, senior director of Ally Invest wealth management. "It can be used for reward or punishment." The advisors share their own stories as well, which "puts them on a level playing field," she said. The advisors will discuss the client's needs, desires and biases around money, and recommend portfolios tailored to the client's goals. The wealth management customers can keep track with digital tools and dashboards such as graphs mapping their progress toward their goals and illustrating their net worth over time, and details about their assets, including how the assets perform against a benchmark.
Ally is capping its client to advisor ratio at 200 to one, and has not yet maxed out. "We are bringing on clients in a slow but responsible way," said Spangard. For now, the service is only open to existing Ally customers. The investable asset minimum of $100,000 is lower than what Ally feels its competitors require for a dedicated advisor, seamless digital client experience and guidance on all assets.
To attract these clients, Ally sent a direct mailer to customers that features photos and names of the advisors, as well as snippets of their "money stories," in a packet of separate cards. For example, one advisor wrote about witnessing his parents' struggles with debt as a first-generation immigrant family; another mentioned getting a job on Wall Street when she was 14. Ally has intentionally hired a diverse adviser base as well.
"A lot of people have called because of that direct mailer," said Spangard. She recalls one customer whose husband had recently died and left her a sizable life insurance check. The woman called after reading the direct mailer. "She said, 'I've never contacted a financial advisor before but I felt like this might be the time,' " said Spangard.
There are benefits to a bank in offering an investing service beyond gathering generating fee income and attracting more assets.
"Banks are getting their arms around this opportunity to serve all sides of a client balance sheet," said Trout. Because financial institutions have other lines of business, cross-selling and upselling products with the information they gain about a client's accounts, risk profile and more "is the holy grail," he said.
Spangard says Ally is not yet doing this directly but is using the information it gathers to learn more about the needs of their clients. Howard says the information a client provides as they open their account may help identify other solutions that can help them achieve their goals.
"Robo advice is yesterday's term," said Trout. "You need a human element."
