MutualFundWire.com: Snap! Are Social Media and Roboadvice About to Converge?

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Wednesday, January 27, 2016

Snap! Are Social Media and Roboadvice About to Converge?

A social media player may soon be entering the wealth management fray.

Evan Spiegel
Snapchat
Chief Executive Officer

Current roboadvisors, like Financial Engines and other automated 401(k) advice brethren that sprouted in the 1990s, face a branding and scale problem. Reaching out directly to individual investors or 401(k) participants requires building a retail brand somehow that can reach tens of millions of Americans. Reaching tens of thousands of 401(k) plan sponsors, or even just a few dozen 401(k) recordkeepers or big broker-dealers and platforms, is a branding and scale problem that seems much more manageable, and indeed those first-generation robos like Financial Engines ended up quickly focusing on getting their brand to the right plan sponsors and platforms, not getting it out to millions of individuals.

Modern roboadvisors have started out targeting individual investors, and some of the big ones have done retail advertising campaigns; New Yorkers may catch a glimpse of Betterment's logo atop the next yellow cab they hail, for example. But retail marketing campaigns are expensive and take lots of time, and in the meantime even the biggest roboadvisors haven't yet made it past a few billion dollars in AUM. Some have made alliances to better reach advisors (one way to extend reach without scaling up).

On the flip side, established asset managers like Aberdeen, BlackRock, and Vanguard, as well as big B-Ds or platforms like Commonwealth, LPL, and Schwab have been going with the "if you can't beat 'em, join 'em" strategy, or at least the "if there's a chance that they'll gain market share, buy 'em or build your own" variation. These companies have brands, and existing retail distribution networks that can leverage roboadvice as a play to grab millennial and post-millennial market share before it's too late.

Enter Snapchat. Earlier this month Mike Kentz of Reuters reported that the independent, Venice, California-based social media company "is understood to be at the front of a queue of tech firms developing Robo-Advisory technology." Snapchat's specialty is video messaging.

Snapchat's possible entry into the space already has industry insiders abuzz at events like this week's FSI OneVoice conference for broker-dealer home office executives. Snapchat already has a retail brand and tens of millions of users, so if it got into roboadvice it could get the word out in a big way and to an already friendly, potentially receptive audience. And it's a good bet that lots of those Snapchat users are millennials or post-millennials, the very audience that established financial services companies and roboadvisors alike are hoping to reach with their roboadvice services. Instant reach and to an enticing audience, that's what the Snapchat folks might see in a robo-advice play.

It's not clear how likely a roboadvisor play is for Snapchat, or for other big social media or tech players with retail brands. Spokespeople for the company declined to comment to Reuters. And the wire service points out that a roboadvice project would come "at a pivotal time for Snapchat" as "the firm has been rattled by concerns surrounding its ability to create a sustainable revenue model." Perhaps roboadvice will offer that revenue model.

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