New financial investment rules can help robo-advisors

Washington’s new rules for financial advisers could give so-called robo-advisors a leg up in the battle for investors’ money.

The new rules, announced on Wednesday, are expected to encourage a rush of retirement savings money into low-cost investments, which robo-advisors claim is their trademark.

The rules can also speed up formal reconciliations between traditional banks and brokerage firms and fintech companies that have built robotic investment platforms.

On Thursday, San Francisco-based robotic company SigFig Wealth Management will announce what it says is its first deal with a bank to offer its digital investing service to bank customers. The deal, with the $3.2 billion Cambridge Savings Bank outside of Boston, will make SigFig’s robo-advice offering available to the bank’s depositors through Cambridge’s online banking services.

SigFig’s chief executive and one of its founders, Mike Sha, said the firm will enter into more deals with even bigger banks in the near future as it shifts its business strategy from a consultancy robotized directly to consumers to a model that works with other financial providers. .

“I think it’s part of a larger trend that banks are increasingly partnering with fintech companies to create faster innovation,” he said in an interview.

Earlier this week, Detroit auto lender Ally Financial announced plans to buy online brokerage firm TradeKing Group, which has built its own robo-advisory operation.

In January, BBVA Compass, the U.S. arm of the Spanish banking giant, announced it had tapped bot firm FutureAdvisor to offer its banking clients digital investment services. FutureAdvisor was acquired by major asset manager BlackRock last year.

Robo-advisors use sophisticated technology and digital platforms that sort clients based on their investment and risk preferences into baskets of low-cost exchange-traded funds. Some, including SigFig, provide advisors online or over the phone, while others are purely automated.

They are shaking up the wealth management industry with significantly lower account management fees, with the potential to attract much larger groups of investors who don’t have enough money to qualify for brokerage services. top of the line.

As banks expand their wealth management divisions, many have talked about expanding robo-advisory businesses. Bank of America‘s Merrill Lynch is expected to introduce an offering in the coming months, and executives at Morgan Stanley and Wells Fargo have talked about developing or acquiring that capability.

In a twist, last year JPMorgan Chase said it would offer retail investors a chance to buy initial public offerings of shares on which it acts as lead adviser through the holding company. Motif Investing digital brokerage, for as little as $250 per order. As Wall Street generally operates, access to a bank’s IPO offers is limited to the wealthiest or best clients.

Cambridge Savings Bank calls its offering SigFig Connect Invest. It is available to bank customers with a minimum of $2,000 to invest.

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