What does the robo-advisor food fight mean for investors?

Adam Nash, Wealthfront's CEO

Adam Nash, Wealthfront’s CEO

Here’s something you don’t see every day: two investment companies in a very public fight about values, greed and putting the interests of customers first.

This is what has happened since Charles Schwab launched Schwab Intelligent Portfolios last month, making it the first major investment company to leap into the so-called “robo-advisory” market.

These automated portfolio management services use algorithms to select a mix of mostly low-cost ETFs for clients who answer online inputs, and then manage the accounts. The field’s early leaders are Wealthfront and Betterment.

Schwab Intelligent Portfolios’ debut prompted an attack by the chief executive officer of Wealthfront, Adam Nash, who charged in a widely-circulated blog post that the service marked a departure from Schwab’s core values of transparency, low cost and putting customers first:

“Much to my dismay, I now find myself hoping we never lose our identity the way Charles Schwab has. It’s my hope that we always place our clients first and show them the transparency they deserve. But if firms like Vanguard can retain their integrity over decades, we know we can too. Selling out isn’t the only option on the table.”

Schwab came back with this:

“Adam wishes he could build a moat around Wealthfront and protect it against competition. But misrepresenting facts isn’t the way to do that.”

The Wealthfront-Schwab food fight focused on some specific criticisms of the new Schwab service’s fees and portfolio structure. But it also illustrates a much broader phenomenon that retirement investors should understand: the growing links between allegedly independent, non-conflicted advisory services and owners of those services who push proprietary investment products.

Learn more in my column today at Reuters Money.

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