I'd disagree with this. In 1993, you couldnt do fractional shares, or auto-invest, or pie-based investments. In 1993, you couldnt purcahse $500/wk of BRKB/AMZN/TSLA because there was no product like that short of paying a mutual fund 150bps. You couldnt tax-loss harvest (like with WealthFront)
You can get that now with M1, FolioFN (GS), ShareBuilder (RIP). It is low investment and high-stickiness.
You're noting net work and involvement and profit, but I think stickiness is another factor to focus on.
Fractional shares are a day-trading tool. Apart from that, yes, you're citing real innovations. (Others include a dramatic reduction in trading costs and ETFs.) To the broader point, none those are unique (any more) to the robo-advisers.
Absolutely not, polar opposite. If i'm a buy-and-hold investor who wants to set-it-and-forget it invest auto every week, Fractional share purchase are the only real way to consistently purchase. How would you buy AMZN every pay period if a single share is more than your entire investment amount.
Most long-term, low-involvement investors wouldn't. They'd buy an ETF. The exertion of selection effect for Amazon versus the rest of the market is a high-involvement action.
Oh, and if they wanted to invest $300/pay period into the S&P 500, note that SPY is currently at 440. https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-sp-5... so absent fractional shares, you cant...
And if you invest monthly, what do you do, buy 1 share (different amount per month)? Or do you just give up and go to Vanguard/Fidelity/etc? This is sort of my point, how is something as basic as repeat-invest not available on the world's biggest bank?
Do you mean automatic deposits and investments? That's table stakes. They offer it. They aren't advertising it because fire-and-forget is 99% of the pitch of the wealth management industry. (That they're messaging it badly is in no way challenged.)
With respect to smaller dollar amounts, the traditional answer was mutual funds. Those usually have $1 minimums. They were historically shit when it came to fees, but now typically come in below 50 bps for broad-market funds.
FolioFN got purchased by GS.
ShareBuilder was purchased by CapitalOne and flushed down the toilet immediately.
Broadly speaking, the retail market can be segmented on two axes: net worth and involvement.
Low net worth, high involvement are day traders: they are profitable through fees, PFOF, et cetera. High net worth, high involvement doesn’t tend to exist long enough to specialise in; they’re, professionals, have better things to do or lose their money.
Low net worth, low involvement is patient capital. Not super profitable per se. But the most likely to develop into the last category: high net worth, low involvement; the money maker.
Robo-advisers targeted the third category. They got more of the first. Those not only bolted to crypto and Robinhood. They also incurred higher costs to the firm while promising less development potential to the fourth category. The actual third category participants, to a large degree, don’t need much more than was available in 1993, or at least are savvy enough not to find themselves paying for it.