While there have been a number of small robo-advisor start-ups in since the financial crisis, and a few traditional financial services firms have thrown their hats into the ring, the looming question of the robo-advisor space is whether, someday, a “mega” web business like Google would want to someday get in on the action. Which, given the sheer scope of the company, could cause some real disruption of financial advisors.
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at the recent announcement that Google has decided to shut down its Google Compare service, which provided consumers an opportunity to compare and then purchase a wide range of financial services products, from CDs and savings accounts to mortgages and car insurance. Some had speculated that it was only a matter of time before Google used the service – which was once actually named Google Advisor – as the launch platform for their own robo-advisor service.
Ultimately, Google declared that its decision to shut down Google Compare was driven by the simple fact that while people might be gathering information online to evaluate financial services products, they weren’t necessarily buying online. In other words, at the end of the day, it takes more than just a website to buy a complex financial services product. A challenge that Google learned from its Google Compare experiment, and that the direct-to-consumer robo-advisor platforms and their slowing growth rates are revealing as well.
Of course, none of this is meant to say that technology isn’t important and won’t change the way that financial advisors do business. But just as online brokerage platforms of the 1990s and the rise of the internet didn’t replace financial advisors, it appears less and less likely that robo-advisors will, either. Still, just as the leading advisory firms ultimately adopted the internet technology of the 1990s to run successful advisory firms today, the cycle is playing out again with Blackrock buying FutureAdvisor and Invesco buying Jemstep. Which means in the end once again it won’t be the technology firms that replace advisors, but the technology-augmented advisors who beat out the rest that lag behind!