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Charles Schwab and Other Robos Resort to Humans to Quell Nerves

February 3, 2016

The automated-advice industry shows no sign of slowing down but when markets are volatile most clients want someone to talk to, the Financial Times writes.

Robo-advisors have had to revert to live chats and traditional call centers to calm investors’ nerves during the past several weeks of volatility, according to the paper.

Charles Schwab, whose robo-advice platform reached $5.3 billion in assets under management since its launch in March, had a one-third increase in customer calls since December and an uptick in online chats, Financial Times writes.

Clients are asking about rebalancing their portfolios or tax harvesting, according to the publication. But less than 1% of the 63,000 accounts on Schwab's robo-advice platform resorted to changing their risk profile or allocations in the first three weeks of the year, Tobin McDaniel, president of Schwab Wealth Investment Advisory, tells the paper. And that’s despite the S&P 500 having its worst start in a decade, the publication writes.

Nonetheless, even one of the industry’s tech vanguards in the robo arena, Betterment, has had to resort to something less automated.

The company has been giving “very personalized, very positive” notifications to its customers, who have been calling and emailing more than usual in the recent weeks, Daniel Egan, director of behavioral finance and investing at the firm, tells the publication.


Robo-advisors currently control just $100 billion in assets under management but that’s expected to reach $5 trillion to $7 trillion by 2025, according to Deloitte data cited by FT.

Many industry experts see the current volatility as a test for the robo-advice industry.

Larger brokerages who said they’re entering the robo game, such as Morgan Stanley and Merrill Lynch, have hinted at platforms that combine automated advice with live advisors, the publication writes.

But one firm believes humans may be overrated in times of crisis.

Instead of talking through their fears, Wealthfront – 90% of whose clients are under 50 – is directing worried customers to online essays by the firm’s chief investment officer.

“This generation has already been through two crashes; they have no illusions that a professional could somehow beat the market or protect them in a downturn,” Adam Nash, chief executive of the firm, tells the paper.

By Alex Padalka
  • To read the Financial Times article cited in this story, click here (free registration required).