Startups typically describe their growth with exponential, not arithmetic, rates. Last year Wealthfront and Betterment's AUM grew by over 10% a month, growth has since fallen to less than 5%. What are these two robos going to do? Growth rates are declining, costs are sky rocketing, revenues are underwhelming, incumbents are fighting back, and investors are questioning. I'd look for both of these companies to seek an early exit at an average valuation or change their business model.
The growth of firms selling computer-generated financial advice is slowing GIVEN the many mistakes that human investors are prone to—selling after a market tumble, trading too often, believing they can beat the stockmarket—dealing with money is perhaps best left to computers. That is the premise behind a host of firms selling computer-generated financial advice, which assist savers tired of paying for pricey human counsel. The low cost of these “robo-advisers” had helped them grow rapidly, to the horror of conventional money-managers. But growth in assets under management (AUM) at the biggest outfits has sagged recently, and with it the upstarts’ prospects.
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