B2C Robo-Advisors Are Dying As Growth Rates Crash

While several of today's leading "robo-advisor" companies were founded in the aftermath of the financial crisis, it wasn't until early 2012 that they finally converged on a common low-cost "automated investment service" model… which, coupled with a surge of media coverage, quickly suggested that they could become the future of financial advice (or at least investment management) for consumers. However, in the year since established players like Schwab and Vanguard launched'competing' services, a fresh look at the robo-advisor landscape reveals that their growth rates are falling rapidly, to just 1/3rd their levels of one year ago. Their apparent demise: an inability to scale their marketing to sustain growth rates in the face of increasing competition and challenging client acquisition costs, coupled with a similar inability to grow their average account sizes. In fact, the combination of rising client acquisition costs and declining average revenue per client may be an outright death knell for the direct-to-consumer robo-advisor movement, as they approach the unsustainable crossover point where the lifetime value of a client, cumulatively, is less than the cost to acquire a single client (given that some have a mere average gross revenue per client of just 50/year!). Accordingly, it's not surprising to see many of the early robo-advisor players pivoting in other directions, using their long runway of available dollars to try to find greater growth traction, with at best one or two that might manage to build a viable brand that survives.