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Morgan Stanley Boss: Robos Only Serve One Segment

July 25, 2017

While Morgan Stanley has opted to roll out a digital advice platform, its CEO doesn’t think robo-advisors will ever replace traditional wealth managers, Business Insider writes.

The wirehouse is preparing to launch a robo-advice platform this fall in a bid to attract the children of its existing clients. But Morgan Stanley chief James Gorman tells Business Insider robos only address a certain segment of the wealth management market. What’s more, investors who start out with robos may turn to traditional financial advisors as they become older and wealthier, the web publication writes.

Furthermore, there’s not that much of a gap cost-wise between traditional wealth managers and robo-advice platforms — and that gap is more than made up for by the extra services provided by human financial advisors, Gorman tells Business Insider.

While robo-advice platforms charge 0.2% to 0.4%, Morgan Stanley’s effective rate, arrived at by dividing the wirehouse’s revenue by its assets under management, is in the low-70 basis points, he tells the web publication. And that’s not such an “expensive gap,” Gorman says. After all, Morgan Stanley’s advisors offer human advice, research, a variety of investment products and access to better deals, he tells Business Insider.

James Gorman (Getty)

Many professionals in the financial services industry agree wealth management can withstand the robo threat, according to a recent LinkedIn survey cited by Business Insider. While 29% of those surveyed believe fintech is overhyped, that number jumps to 43% for professionals in wealth management, according to the survey.

And even robo-advice pioneer Betterment seems to believe humans will forever play a role in wealth management, Business Insider writes. The firm rolled out a new hybrid service earlier this year that lets its clients have some contact with a human advisor — for 0.4% a year, as reported previously.

By Alex Padalka
  • To read the Business Insider article cited in this story, click here.