JPMorgan to Unplug Its Robo-Advisor, Citing Weak Demand

“While highly scalable, robo advisors charge very low fees and often have low average account sizes, making it difficult to turn a profit, especially if customer acquisitions costs were higher than anticipated,” he said.

Generally, robo advice has proved a difficult business model, according to Goldstone.

“Those that have reached scale, like Vanguard, Schwab, Betterment and Wealthfront, appear like they have a sustainable robo-business,” he said. “Many other products, even those at major institutions like JPMorgan I believe have struggled to gather the clients and AUM necessary to make the robo line of business viable in the long run.”

Joshua Brown, Ritholtz Wealth Management CEO, said in a LinkedIn post this week that the JPMorgan platform was shutting down “not due to lack of trying or investment or expertise — but because people want more and more is a different type of engagement. More means personalized. Personalization requires talent and attention. You have to charge something in order to be able to provide that.”

While automated asset allocation is more beneficial to mass affluent investors than the commission-laden brokerage products of yore, ”it’s not advice,” Brown continued. ”Advice is advice. When people get ill, their first instinct isn’t ‘what’s the fastest, cheapest doctor?’ When they get into legal trouble, they don’t search for ‘the most convenient, easy to access’ lawyer. And when they’ve got money at risk, a future to plan for, career complexity and the stark inevitability of death and taxes at their door, they certainly don’t prioritize ‘user interface’ when looking for answers.”

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