If you can't beat them, join them.
That's the attitude of a growing number of big banks, which have been locked in a battle against an unlikely competitor: web-based financial advisors. Slowly but surely, those foes appear to be winning by default as they force banks to adapt to the brave new world of giving financial advice online.
Wall Street has been stuck in what one executive recently said was "the Dark Ages" of wealth management services that haven't kept pace with technological change. With a generational wealth transfer of $30 trillion under way, how consumers respond to the overall shift to digital money management is set to play a big role in the future — and the bottom line — of some of Wall Street's most prominent financial services firms.
While big banks have been slow to confront the challenge posed by up-and-coming online fund managers, or robo-advisors, that may be changing. As a result, companies like Bank of America are responding by bolstering their existing web-based capabilities.
"We are constantly looking for ways to make the financial lives of our clients better," said Aron Levine, head of Merrill Edge at BofA.
"We see an opportunity for an automated portfolio management offering that could complement the advice and guidance offered by our financial solutions advisors," he said. "It's too soon to discuss any specifics, but any offering would be a natural extension of our existing platform."
Mergers and team-ups have been been a common strategy in the playbook of Wall Street firms looking to digitize more of their business. SigFig Wealth Management, a California-based start-up, last month entered into a partnership with UBS Group and the partners plan to form a research lab to develop new online management tools.
Others, including Goldman Sachs and BlackRock, have turned to mergers and acquisitions (M&A) in order to boost their online offerings. Within the last year, the financial giants bought start-ups Honest Dollar and FutureAdvisor, respectively.
Charles Schwab launched a robo-advisor of its own in 2015, and clients responded accordingly: As of January 2016 its assets under management to more than $5 billion.
A company spokeswoman said told CNBC Schwab's tally recently grew to more than $7 billion. That puts Schwab's robo-product ahead of the assets under management of robo-advisor Betterment, which has piled up $4.8 billion since 2007, according to a company representative. Vanguard has also launched an online wealth management tool of its own, as has Fidelity.
'give it away for free'
Big banks are out to take on their other digital competitors, as well. JPMorgan Chase CEO Jamie Dimon recently said not only could his company build a competing product to go up against online portfolio managers; it could "give it away for free, if we want."
That could be perceived as a threat to other robo-advisors such as stock investing app Robinhood, which also offers no-fee trades. But that's not the only thing robo-businesses could disrupt.
As wealth management gravitates toward automated options, underperforming wealth managers and financial advisors could also come under the gun if more bank customers discover a preference for digital services, some say.