In what has been an
This week, JPMorgan Automated Investing clients were notified that the service will be shutting down in the second quarter of 2024.
In a notice to customers obtained by Financial Planning, it was explained that when the service shutters early next year, all JPMorgan Automated Investing Accounts will be converted to JPMorgan Self-Directed Investing online brokerage accounts.
Current investments will carry over and not be sold, and all account numbers will remain the same and can be accessed by using existing login credentials.
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The "why" behind the shut down stems from issues others in the space have been battling for the past couple of years. Chiefly, finding a way to make robo-advisors generate revenue that is worth the time and effort.
"The robo-investing business did not take off in the wealth industry as expected. It hasn't scaled or become profitable for many, including us," according to a statement provided by a company spokeswoman. "We believe our self-directed and advisor-led platforms offer great alternatives to our clients and are focusing our resources there."
After accounts convert to JPMorgan Self-Directed Investing, JPMorgan will no longer manage the investments, and the company will not charge advisory fees or require minimum balances.
"You will be solely responsible for any decisions about whether to buy, hold or sell investments in your account, as provided in the Self-Directed Account Agreement," said the notification to customers.
In the wake of the news, Nikhil Sharma, head of digital wealth solutions at technology management consultancy firm Capco, said that robos once believed to have the power to "entirely supplant human advisory" are struggling to "demonstrate sustainable profitability."
"Instead, the true strength of digital experiences, driven by technology, lies in sparking customer interest and seamlessly connecting them with advisors, rather than solely executing automated rebalancing," Sharma said in an email to Financial Planning.
According to Sharma, this realization sparked a dual response. On one hand, fintechs diversified to encompass a wider spectrum of financial services, including banking and advisory services, while some standalone robos shuttered.
On the other, larger firms that recognized the overlap in features needed for both mass-affluent and mass-market offerings had to make a critical strategic choice, and that choice was to maintain separate platforms or consolidate onto a singular chassis that aligned with their strategic objectives.
Sharma said this decision-making process, exemplified by JPMorgan's approach, involves doubling down on an offering that capitalizes on their strengths. He added that the perceived recent success of JPMorgan's wealth plan might have accelerated this pivot, signaling a potential shift in the industry toward consolidating and optimizing offerings for greater efficacy.
"In comparing feature sets, the essence of the robo-advising experience has predominantly centered on swift onboarding, aiming to expedite the account opening process," Sharma said. "In contrast, the focus of a mass affluent experience lies in initiating a demand for (a) personalized financial plan, fostering a sense of need for expert financial guidance."
The year began on a
A Betterment spokesperson cited external forces as the reason behind the cuts while David Goldstone, the manager of investment research at Condor Capital Wealth Management, suggested that it "may be time for robo-advisors to prove they can operate profitably as stand-alone businesses."
About a month later, it was announced that FutureAdvisor, the robo-advisor that BlackRock made a $152 million deal to purchase in 2015,
But 2023 wasn't all about shutdowns, sales, layoffs and fines. It also brought the debut of new robo-advice offerings like
The service, which the company says carries an annual fee of 0.25% with a monthly minimum of 25 cents, is being billed as a cost-effective way for its customers to create investment portfolios.
