In collaboration with Michael Tanney, Wanderlust Wealth Management, New York.

Not one day goes by without some news on some robo-advisor somewhere in the world. The phenomenon is interesting in itself, but what blows my mind is the speed with which these investment platforms are being adopted by RIAs (Registered Investment Advisor) to lower costs and increase flexibility for their clients.

My friend Michael Tanney and I, both investors in robo-advisor WiseBanyan, recently exchanged some thoughts on a new European-based effort in the field:

Roberto – Did you like it?

Michael – Yes; I love the name. Currently, the biggest opportunity is in the business-to-business (B2B) space. More of the robo’s are pivoting to offer the core capabilities RIAs need. I’m curious how the fiduciary rule changes the landscape. It should lead to a huge opportunity for robo’s to provide a B2B platform in the retirement benefits space. Even Goldman Sachs, who has never been in the business of managing 401Ks, wasn’t blind – they purchased Honest Dollar earlier this year. I spoke with someone at a large institution last week: as a RIA, I have access to any alternative investment shown to their private clients, as well as any of their individually managed strategies. The writing is on the wall; technology is increasingly removing barriers.

R – How are robo’s working in the B2B space? Aren’t they competitors of RIAs?

M – I don’t see robo’s as competitors to RIAs. Armies of ‘professionals’ are now empowered to gather assets and leverage the robo’s technological infrastructure as an external spine to their business. Just because your dentist tells you to floss, gives you floss at your annual checkup, and reminds you all the time…do you floss? People always need personal financial advice, regardless of the delivery mechanism, because they have difficulties with discipline [to execute and monitor their investment program]. The B2B opportunity is tremendous. I’d love to see WiseBanyan continue building its millennial client base while simultaneously renting its technology to RIAs.

R – Why do you think some robo’s are reluctant to do it?

M – Because of human nature. We are programmed to seek instant gratification. Even the few investors who understand the power of delayed gratification through compounding struggle with the balance of now vs. later. Now almost always expands into later’s space because it feels good. Think of working out. If we know without any doubt that working out is healthy, why do we find excuses not to work out? Only when external pressure is applied – typically through the peer pressure of a workout partner or a costly personal trainer – do we push through the excuses, and end up feeling good. We ask ourselves “why did I try to get out of it today?!” We experience this internal struggle repeatedly. Nutrition is the same: our internal health compass knows what’s healthy and what’s not. Unless we have a nutritionist hovering over we’ll more often than not veer towards unhealthy. We all lack the discipline to do what’s right all the time and prefer instant gratification over delayed. I think that’s been a fundamental human flaw since Adam and Eve.

M – Maybe we can clean up all this and get our first joint blog post? 

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