So let's talk about the future of Artificial Intelligence in robo-Advice, especially as it relates to interactions with customers directly. The definition of robo-advisors and robo-advisory activities is fairly fuzzy. It originally meant, a kind of business model organized around algorithms to reduce costs of client service disintermediating humans. However, today that definition has changed. Now we think of it as a financial advisory, firm, a practice, and enterprise in the financial services industry, using an algorithm to build a customer allocation, based on automated and usually online inputs. Those so-called robo-advisors usually provide, capture of client information, their goals, their capacity, their preferences, or their tolerance for taking risk. It includes output of portfolio allocations, or a set of portfolio allocations or options, for clients to choose. It could also include automated rebalancing of positions across time, or across market conditions change, or it could involve and in some cases reportedly does tax loss harvesting, or optimal rebalancing of taxable portfolios. Finally of course, automated reporting which an industry that has found automated reporting to be, at least historically challenging, a welcome feature. Theoretically speaking because algorithms and artificially oriented bots can learn from experience, perhaps they can become more personal and more human, and therefore more relatable across time. Perhaps they can also make more responsible decisions however, recent market experience including across periods of market volatility, suggests that most clients are comfortable without human oversight at some point. In part that comes down to trust or the lack of trust and algorithms, especially in the face of uncertainty about the outcomes of the algorithm. Two of the largest so-called robots that are independent of larger firms namely, Wealthfront and Betterment, both have "client services representatives" as an example. As far as we know no "pure" vision of the original robo-notion has been achieved. However, the model is incredibly useful because it sets a baseline, and ultimately a cost-based competitor. The traditional human only model, almost surely where it's all going, will involve what we now call a bionic model linking humans and algorithms, and hopefully the best of both worlds together. As you might recall, growth has been tremendous in this area. Vanguard Personal Advisor Services rebranded as a Robo in May of 2015, then had around $21 billion in assets, as of 2018, it had over $100 billion. Wealthfront the independent Robo, currently has over $11 billion, and Betterment now has 16.5, 90 percent of Wealthfront assets are actually allocate the Vanguard funds. Although the business strategies of these two large independent robo-firms has differed for example, Betterment recently shifted its business model to emphasize defined contribution retirement plan activities, as opposed to purely non-taxable DC business, both have seen traumatic growth. In addition, traditional brokerage firms including discount brokerage firms, have offered robot-like offerings including Schwab, Bank of America Merrill Lynch, and Fidelity.
