Wells Fargo on Monday launched a digital, low-cost advisory service aimed at younger investors, a wager on a promising market made more complicated by the bank’s ongoing sales practices mess, as well as questions about the future of investment advising.
Intuitive Investor is a hybrid service that’s primarily digital, but offers access to customer service representatives when clients have questions. Clients must have at least $10,000 in assets to invest, and can expect to pay an advisory fee of 50 basis points, as well as an average of 15 basis points to cover trades: accounts will be automatically “re-balanced” according to client profiles and preferences.
wants Intuitive to bridge the gap between its online-only, do-it-yourself investing product, and its nationwide team of hands-on, high-touch financial advisers. Its target client, according to Jon Weiss, the bank’s head of Wealth and Investment Management, is a member of either Generation X or Generation Y, and a “convenience-seeker” who’s comfortable interacting with a digital institution, not a specific human.
That target client is also, likely, already a Wells Fargo bank customer. The transition from bank customer to investing client is a natural and normal step made much more uncomfortable by Wells’ ongoing misdeeds in aggressively steering customers to additional products—and in many cases opening accounts for them without their knowledge or consent.
Questions about the scandals put Weiss in the difficult position of having to defend the bank even as he was touting Intuitive’s launch. “Cross-selling is not a word we’re using a lot these days,” he said on Monday. “I call it trying to solve your clients’ needs.”
But if Intuitive is successful, it won’t just be clients whose needs are solved. The U.S. is in the midst of a massive intergenerational wealth transfer, with as much as $30 trillion changing hands from Baby Boomers to millennials and Generation X-ers. It’s an irresistible opportunity for the financial services profession, and Wells counts 20 million existing Generation-X and -Y bank customers.
Weiss emphasizes that Wells employees in its community bank branches will receive incentives for referrals to Intuitive—but won’t work to quotas.
Read: Wells Fargo’s CEO knows why customers are staying away even if Wall Street needs a reminder
But it’s not just scandal-plagued Wells facing questions about digital investing. Many financial service professionals question whether even the most savvy algorithms and a call center of representatives reading from scripts can provide thoughtful enough service for most clients. (Wells says the live advice will come from “licensed, phone-based financial advisors.”)
“The world we live in asks for more of a traditional adviser, not less,” said John Mousseau, director of fixed income of Cumberland Advisors, a Sarasota, Florida-based investment advisory firm with nearly $3 billion in assets under management for high net worth families and foundations.
Companies like Cumberland stand to lose if robo-advising or hybrid approaches like Intuitive’s become more popular. But Mousseau thinks that’s a big if.
“Investing is very much like the old Tip O’Neill saying, all politics is local. Investing is best done with someone who knows you,” he said.
Wells’ target Intuitive client has as much right to a personalized level of service as someone with far more assets, Mousseau said, and for the same amount Intuitive charges it’s likely those clients can find real people who will, as he puts it, “look a client in the eye.”
In some ways, Wells may share the same goal. Weiss says he will gauge Intuitive a success if it grows, attracts “the next generation,” and migrates them to the full-service advisory business.
But he knows it may be an uphill climb. Intuitive is late to the bank/brokerage hybrid business. Products like Schwab’s Intelligent Advisory and Bank of America’s
Merrill Edge Guided Investing products have been around for a while, and charge less. And pure robo-advisers like Betterment LLC charge about half what Intuitive is asking.
Weiss said he’s less worried about losing market share in the future to a brokerage like Merrill, and more about robo-advisers.