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Robos Are the New Walkman. Household Portfolio Management Is the iPhone.

By Jack Sharry | October 2, 2018 | News






It’s easy to feel like the future of financial advice is – and will remain – dominated by Robos. But Robos ultimately will prove insufficient. A new generation of fintech is emerging to connect the dots and enable advisors to do their job at a level previously unimaginable.

Dear industry: Wake up. The daily conversation about Robo Advisors being the future needs to end. We know. It’s easy to feel like the future of financial advice is – and will remain – dominated by Robos. But this pity party has to end.

Not too long ago, the Sony Walkman was a new and cool disruption. Music! In your pocket! But fast forward to today and your iPhone is indispensable to everyday life – phone, email, texts, photos, social media, shopping, music, investing, games, travel, live streaming and on and on and on, while nobody has a Walkman anymore, and younger generations have never seen one! The truth is, Robos are today’s Walkman. But household portfolio management? That’s our iPhone.

The Robos did their job. They awakened a reticent industry to embrace technology. Robos offer a low-cost, easy-to-use proprietary product. Good, but ultimately insufficient. We now find ourselves in a post-Robo era marked by tax-smart, risk-smart, integrated tech stacks and ecosystems, and it’s about time we shift and embrace the new narrative.

When judged by assets under management, Robos are barely a blip on the screen. Excluding the much larger, late entrants – Vanguard, Fidelity, and Schwab – robo assets raised by initial disruptors are miniscule. The only two leaders with any meaningful assets are Betterment ($10 billion in AUM) and Wealthfront ($7.4 billion). Retail assets total $37 trillion as of year-end 2017. These two leaders account for 0.047 % of retail assets – that’s not even a rounding error.

A new generation of fintech is emerging to connect the dots and enable advisors to do their job at a level previously unimaginable. Wealth managers, asset managers, annuity companies and technology providers are now building comprehensive platforms with toolsets designed to complement each other and benefit investors by optimizing and coordinating the typical five to six accounts in a household.

This creates improved after-tax returns and income without additional risk and, more important, quantifies the improved investor outcomes of tax-smart, risk-smart household management. At the same time, financial advisors benefit by providing enhanced advice and enjoying greater practice efficiency, and they stand to attract held-away assets while increasing retention of current client assets.

Morningstar and Ernst & Young have conducted separate studies finding that when multiple household accounts and products are managed in a coordinated and strategic way, investors can realize significant incremental after-tax returns and income. The Morningstar study found the potential for an additional 100 to 200 basis points per year in enhanced returns, while EY found that investors can improve after-tax returns and income by as much as 45 percent over their lifetimes.

Morgan Stanley is the clear leader in executing a comprehensive, household digital strategy, and one whose approach is likely to be imitated by other big firms in the future. By its own admission, Morgan Stanley built a Robo for entry-level investors, but acknowledge it’s a small part of its strategy, and the bulk of its R&D is far more focused on holistic portfolio management.

According to recent interviews, the company’s strategy is to own the household and thereby improve household results and quantify the investor benefit, while dramatically growing the bottom line. Morgan Stanley currently manages $2 trillion and knows its clients have another $2 trillion held elsewhere. Its growth strategy is predicated on winning as much of those held away assets as possible. And it is making great strides in building an ecosystem that demonstrates how it can improve investor outcomes.

They have done this by partnering with fintech leaders and investing heavily in new technologies: Yodlee for data aggregation; Addepar for household-level reporting; Aladdin for risk management and portfolio construction; LifeYield for tax-smart asset location and intelligent withdrawals from all household accounts, including quantifying the client’s financial benefit; and artificial intelligence capabilities to identify the highest level of client need for advisors to help improve outcomes. And those are just the partnerships it has announced.

By connecting the data, offering a robust tool box, an array of state-of-the-art products and models, and the ability to suggest tax-smart withdrawals, optimal guidance and decision-making can be provided across the household portfolio. If rendered consistently over a decades-long timeframe, significantly more assets are accumulated, distributed, and ultimately passed on to heirs.

The investments and capabilities the industry is connecting to create comprehensive and coordinated platforms include the following:

  • Financial planning
  • Account aggregation
  • Risk management/asset allocation guidance
  • Investment and product proposal generation
  • Tax optimization across multiple products and account types to ensure tax-smart asset location
  • Ongoing household-level management and rebalancing of all holdings, products, and accounts, including advisory models, brokerage holdings, and annuities
  • Optimal income sourcing and sequencing from multiple accounts, products, and other income sources such as Social Security and pensions, as well as Roth individual retirement account (IRA) conversions
  • Trading platforms
  • Household-level reporting

These technology elements exist. What’s been missing until recently is the connective tissue, which is not limited to tools and data flow but includes the art—the handholding, understanding, interpretation, experience, and guidance—that only a human advisor can provide.

We are in the early stages of this brave new post-robo world. As these technologies become more broadly available and connected, those who embrace them will come out ahead. By taking full advantage of the advances in multi-account technology, advisors will be able to provide smarter, more comprehensive advice and improved investor outcomes, allowing investors and advisors alike to make and keep more money.

As investors move closer to retirement and work with advisors to embrace a more coordinated, tax-smart, risk-smart household portfolio management approach, they will bolster their nest eggs with additional assets and income, becoming the ultimate winners in this post-robo world.

About LifeYield
LifeYield (, creators of the Taxficient Score®, is the industry innovator and leader in facilitating tax-smart, risk-smart household portfolio management. LifeYield's Advantage Suite® enables financial advisors to provide a comprehensive, tax-aware view of a client's entire investment and insurance portfolio, including easy-to-use tools to engage clients so they make and keep more money, and achieve their financial goals.
Based in Boston and founded by finance and technology industry leaders, LifeYield believes that by leveraging digitally enhanced advice advisors can improve investor outcomes and enhance the value and experience of support goals-based wealth management strategies.
For more information, please visit