NEW YORK (Reuters) - Roboadvisers Wealthfront and Betterment may pose a threat to traditional bank wealth management companies, but they aren’t in a hurry to get a banking license, their chief executives said this week at the Reuters Global Wealth Management Summit.
On Tuesday, Betterment CEO Jon Stein said “whether or not we become a bank is a topic of discussion currently,” and even came up at the last board meeting. But Stein worries it might present a conflict, because banks earn money from deposit accounts and loans.
Some banks “have a big incentive to put your money into bank deposits,” Stein said. “That’s where they make most of their money and that’s not necessarily in the best interest of their clients.”
Instead, Stein said Betterment would potentially be more interested in advising customers on an array of loan options from different lenders.
Similarly, Wealthfront CEO Adam Nash did not want to rule out the option of becoming a bank, but he said it is not a current focus.
“We are always looking at the demands from our clients and we will push into any or every service that they put a priority on from us and we expect those demands to change over time,” Nash said Friday at the summit, held at the Reuters office in New York.
So-called roboadvisers provide low cost automated investment advice. Betterment and Wealthfront are the most prominent roboadvisers, and came on the scene in 2010 and 2011,respectively.
Since then, competitors like Aspiration and Vanguard’s Personal Advisor Service platform have also sprung up. Firms including Charles Schwab (SCHW.N), Bank of AmericaCorp (BAC.N), Morgan Stanley (MS.N), BlackRock Inc (BLK.N), and Goldman Sachs Group (GS.N) have either acquired stakes in or developed their own in-house robo competitors as well.
Wells Fargo & Co’s (WFC.N) top wealth management executive said last month the bank plans to announce an investment and strategic partnership tied to roboadviser-type offerings by the end of the second quarter.
Reporting by Dan Freed in New York; Editing by James Dalgleish