We're often puzzled as to how people can use terminology to put an entirely new coat of paint on something that's been around for a long time and then purport that it's new and exciting. Take robo advisors as an example. In the good old days, you met with a wealth manager who asked you a bunch of questions and then plugged them into a piece of software that said where you should optimally invest your money. Usually, this is just a very simple asset allocation strategy with X% in bonds and Y% in stocks based on your age and appetite for risk. Then, as a result of the perpetual cost savings initiatives that permeate the corporate world, we decided to remove the human element, externalize the software, and call it a "robo advisor", a term that somehow implies that there is more under the hood than there actually is.

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.