Sales and marketing

GenX: Following Millennials to Robo Advisors?

During the typical month, I get several calls from Millennials seeking advice about incorporating, business building, entrepreneurship, the channel and/or climbing the corporate ladder. I enjoy the conversations. And quite frankly, I typically learn quite a bit from the inquiries.

A key point: While the mainstream media covers issues like Millennial student loan debt, plenty of Millennials are avoiding or escaping from those debt loads, contributing to 401Ks... and embracing so-called robo-advisors like Betterment an Wealthfront.

Robo-advisors are SaaS-based applications that use software algorithms and automated systems to allocate your funds, rebalance your investments, maximize tax loss harvesting and more. The current robo-investing wave reminds me of the early online trading wave.

Rewind to the mid-1990s or so. At the time, it was common to pay a stock broker $100 or more to buy or sell shares on your behalf. If you were a small-time investor -- perhaps investing $1000 or less at a time -- those are very expensive trades. Imagine handing a broker $1,000 to invest in Pepsi shares, only to discover you had $900 worth of Pepsi stock because the trade cost you $100. Ouch.

Low-cost Trading vs. Wealth Managers

Then the web browser opened the door for Ameritrade, eTrade and so many other online discount brokers. For $10 or so per trade -- regardless of the trade's size -- you were controlling your financial destiny in real time. It was pretty awesome. Very disruptive. But also became overwhelming for anybody who was trying to "watch" and "manage" their money in real time.

Amid the dot-com boom, mergers, acquisitions, IPOs and other financial "events," many GenXers graduated from online trading systems to professional wealth management firms. Assuming you have roughly $1 million or more, wealth management firms will charge about 1 percent annually to professionally manage those assets.

In many cases that's money well spent -- potentially providing "peace of mind" that somebody who truly understands financial management guides your portfolio.

Robo Advisors: GenX Emulates Millennials

But now I'm starting to hear from GenX entrepreneurs who have launched, built and sold various businesses -- include MSPs. In their quest to invest some or all of their "exit" money, they're weighing the pros and cons of professional wealth management firms vs. so-called robo advisors.

I know quite a few GenX folks who are sticking with their professional wealth managers. But a growing GenX camp is following the Millennial crowd and signing up for robo-investing services.

And that begs the question: Can robo advisors outperform professional money managers and wealth management firms? That may be beside the point. Much in the way that Amazon Web Services and made powerful IT infrastructure and applications available to anyone, robo advisors make (some) wealth management-type services  available to all investors. No doubt, Wealthfront fees and Betterment fees are incredibly low.

Millennials were the first to cash in on those benefits. Now, GenX is catching on... Fast.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.