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Wednesday, Feb 21, 2024

United Capital’s ‘Bionic Adviser’ Vs. Robos

The demise of human financial advisers and the rise of robo advisers aren’t so assured if United Capital Financial Advisers LLC has anything to say about it.

The Newport Beach-based firm is spending $10 million a year to develop technology to help registered investment advisers maintain and build their client bases in the heat of the growing competition.

“We’re not a robo adviser—we’re building a bionic adviser,” said Jason Gordo, head of United Capital’s National Adviser Partnerships, which markets the new technology. “We believe the adviser of the future needs to become bionic and blend the power of the machine with empathy and knowledge that only a human can provide.”

United Capital, which has $17.4 billion in assets under management, in February released three proprietary applications for its FinLife Partners planning platform.

The platform helps its sale force, though Gordo said he’s excited about licensing a white-label version of FinLife to other registered advisers.

“It will be a major revenue generator” for United Capital, he said. “We see this business being just as big as our core partner business in the next 24 to 36 months.”

Gordo declined to say how much revenue the licensing could generate.

United Capital has been one of the fastest-growing companies in Orange County, ranking 10th on the Business Journal’s 2016 list of fastest-growing private companies with a two-year growth rate of 53%. The firm, which has 181 advisers and 79 offices across the country, reported sales of $149.7 million for the 12 months ended June 30.

Robo advisers have created anxiety among human advisers and actively-managed investment funds, where fees are under constant downward pressure.

What’s also known as the digital advice market lowers fees by avoiding humans and using algorithms to tell investors which portfolios will give them the best returns. Many individual investors have flocked to them following the recession in order to build their retirement funds back up. Firms such as Vanguard Group, Charles Schwab & Co., Betterment LLC and Wealthfront Inc. charge as little as 0.25% of assets versus the typical 1% collected by an adviser.

Assets in the robo market may jump almost six-fold to $489 billion by 2020 from an estimated $83 billion at the end of last year, according to researcher Cerulli Associates. Low-fee indexes furthermore have grown four-fold in the past decade to $7 trillion, according to Morningstar.

Active management, by contrast, climbed 61% during the same period to $24.5 trillion worldwide, Morningstar said.

Active advisers are combating criticism of their fees by pointing out that algorithms don’t fit every situation.

“A robo adviser is good for someone getting started, like Turbo Tax or Legal Zoom,” Gordo said. “These robo solutions are having a hard time working with people when the decision can be catastrophic.”

He noted that some robo advisers, including Betterment and Charles Schwab, are starting to give clients the option of a human adviser for additional fees. Even Vanguard Group, the biggest robo adviser, offers a human adviser if clients request it.

“Recent Vanguard research shows that an adviser who provides professional financial planning, coaching, and portfolio management services can add meaningful value compared to the average investor experience,” Vanguard said on its website.


United Capital was founded in 2005 by Joe Duran, who previously was president of GE Private Asset Management. He wrote in a Feb. 14 Wall Street Journal column that geography is no longer as important in the financial adviser industry.

“Advisers must adapt their service delivery to help people make choices for their financial lives when and where they want,” he said.

For example, United Capital’s new GuideCenter application permits consumers to use their cellphones or desktops to check their financial plans and call their advisers. Another new application, Investment Viewfinder, integrates with Morningstar to compare trade-offs between risks and investments.

Clients can instantly obtain an analysis to read rather than wait for their advisers to produce reports two weeks later, Gordo said.

“When clients wake up in the middle of the night, they might be worried if they are OK financially, if they are prepared,” he said. The programs “are geared at answering these basic questions. We want to put the power in their hands.”

Growth Tech

Gordo, 42, has a long history in the industry, including seven years as an adviser at Smith Barney. In 2008 he and Jeff Burrow launched Modesto-based Valley Wealth, building assets under management to $220 million and an additional $100 million in corporate retirement planning. United Capital acquired Valley Wealth in 2014.

The pair, along with Melroy Saldanha, also developed the FlexScore application, which eventually attracted angel investors.

FlexScore itself could be considered a robo adviser, but instead of allocating funds, it provided financial advice. The application produced a financial score that showed the consumers how financially ready they were for big decisions, like buying a house or retiring. It generated revenue from referrals of its users to advisers and companies, which provided refinancing services for mortgages and auto and student loans.

United Capital last year snapped up FlexScore, which by then had 50,000 users, and it’s now part of the FinLife platform.

Gone are the days, however, when FlexScore generated revenue through referrals. Gordo said the opportunity is instead licensing the technology to registered independent advisers to fight the rise of the robo adviser.

The platform, for example, can help a human adviser service as many as 1,000 clients instead of the typical 150 to 200, Gordo said.

“This is the adviser of the future,” he said. “Advisers are no longer relevant without tools. We also believe clients want a human on the other side of the conversation to provide empathy and wisdom. The robo adviser cannot do that.”

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Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.

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