SoFi jumps into robo advice

BI Intelligence

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As part of a broader strategy to become a full-service financial company, US alt lender SoFi on Tuesday announced the launch of SoFi Wealth, its wealth management platform, as well as plans to roll out financial planning services this summer for young families, couples, and life events like buying a first home.

SoFi Wealth, which had been in beta for a year, is now available either online or via an iOS and Android compatible mobile app.

SoFi Wealth features automated investment portfolios; no management fees for existing SoFi borrowers and 0.25% charges for new users; a $500 minimum investment threshold; and member benefits like community events and discounts on other SoFi products. SoFi Wealth will also offer access to human investment advisors.

SoFi says the human element, at no extra cost, is what will differentiate its offering from those of its rivals. For no added fee, SoFi wealth will allow investors to ask licensed advisors for guidance, either via phone or online chat, before making a big investment decision. The company said that while people are happy with most robo-advisors’ low fees and streamlined automation, they are put off by not having a human to turn to when they are confused: It pointed to a Gallup poll that showed only 5% of US investors think robo-advisors make people feel assured about their investment choices. SoFi said the human element will add particular value for first-time investors.

SoFi Wealth seems well positioned to succeed. The provision of human advice at no extra charge seems to address a real pain point. Also, many competitors can’t afford to offer fees as low as SoFi Wealth because, unlike the lender, robo-advice is their only line of business, and they rely on fees to boost assets under management (AUM) and earn revenue. Moreover, a major problem for many startup robo-advisors is earning customer trust — SoFi is already well known for its community feel and high customer satisfaction. This should make it easy for SoFi to cross-sell its wealth management to existing customers, and help it bring new customers on board. Overall, SoFi has a combination of advantages that many rival robo-advisors have only in isolation, which could give it a major boost.

Robo advisors are threatening to upend the enormous global wealth management industry in several ways, and they are likely to arrive in full force within the next few years.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on robo advising that looks at the market for robo advisory services, the drivers behind consumer adoption of robo advising, why the robo advisor market presents an opportunity to traditional wealth management firms, and how startup robo advisors can succeed as massive legacy companies begin…

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