Free planning apps drive down cost for advice in 2022

This article is one in a series of outlooks for 2022 by the InvestmentNews team.

As Americans opt for easier ways to build their financial futures, fintechs are proving cheaper and more efficient alternatives and could drive down the cost of wealth management in the process. 

Millions of consumers are already creating financial plans right from their mobile phones. After a short questionnaire, the apps generate retirement plans in under 15 minutes — less than it takes for most people to drive to their local Edward Jones & Co. There’s help with mortgages, college loans, investments and budgeting, and even comparisons between current asset allocations to recommended ones.

If you’re thinking, it’s just the robos, it’s not. Some of the most recognizable names in financial services — like Fidelity Investments Inc., Charles Schwab & Co. and Bank of America Corp. — are already on board. BofA’s Life Plan, for example, helped almost half a million customers with plans in its first month and is now available to nearly 40 million active banking customers at no additional cost.

With all this free planning technology available, the news of 2022 won’t be about the launch of the next mobile platform. Instead, we could be asking if anyone is still willing to pay for financial plans when they come on their favorite investing app gratis.

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Make no mistake, these online plans being given away by digital-first firms are limited in scope and literally take minutes to complete. The information gathered goes little deeper than age, net worth, current income and risk tolerance. And that’s a far cry from the comprehensive plans traditional advisers create alongside their clients in hour-long meetings. 

To what extent planning does become commodified — and if advisers will still be able to charge for planning when everyone from fintechs to global banking corporations is offering them on the house — is hard to say. It’s certainly difficult to imagine advisers having any trouble continuing to charge the traditional one percent on assets. 

However, fintechs certainly have a way of driving down costs in wealth management and undercutting fees, and we need look no further than the race to zero on commission-free stock trades initiated by Robinhood Markets Inc. as Exhibit No. 1.

While 2021 was about attracting new customers and cross-selling investments, more recently launched planning apps may actually help the industry by steering non-advised clients toward managed relationships. Last month, fintech Lasso announced a gamified platform to help users create plans and find suitable advisers, and Toronto’s Planswell Inc. advertises customized financial plans in under three minutes and sells those leads to advisers for $450 a month. 

While mobile apps could ultimately bring down the price of financial advice, they will also funnel a significant portion of new clients into managed relationships.

For sure, these new planning apps are opening up the door for a larger swath of American consumers to gain access to wealth management. And by selling those leads, they’re also giving advisers the ability to stand at the screen door and welcome them in.

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Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.

Andrew Vincent
Andrew is half-human, half-gamer. He's also a science fiction author writing for BleeBot.
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