the fintech disruption of the status quo in financial services is for real robinhood and sofi made it through to initial public offerings even if the market hasnt been kind to silicon valleybacked ipos of late but for the roboadvisory wealth management firms that made a big splash over the past decade looking to slash the costs of financial advice and investment management through tech platforms and use of etfs the exit strategy is looking more like selling out to wall street and wealth management incumbents than rivaling them as standalone competitors earlier this week wealthfront which was backed by silicon valley elites and included some investment luminaries was sold to ubs in a 14 billion deal thats not a bad exit by any means but falls far short of the loftiest dreams of the fintech disruptors in 2020 wealthfront rival personal capital was sold to empower financial for roughly 1 billion betterment the third in the trio is now alone as an independent and was valued in a funding round last year at a similar size to the recent acquisition exits with a 1 billion valuation now just the starting point for being a startup taken seriously in the venture world the exits speak to how difficult technological disruption is in the financial services industry even as digital adoption becomes critical to any financial services firms future market share gains the roboadvisors were right about a lot there is a new generation of investors that was being underserved by the incumbents and looking for a digitalfirst approach to help them with core investment and financial planning and among roboadvisors wealthfront betterment and personal capital are notable for achieving real scale not easy to do wealthfront has roughly 27 billion in assets under management betterment has a little more and has still been diversifying into additional financial verticals including retirement plan services but today vanguard which has two levels of roboadvisory services charging between 15 basis points and 30 basis points the latter including a human advisor touch is the leader in the space with over 200 billion in its digital investment platform schwab has over 60 billion look at schwab and vanguard said david goldstone who has tracked the space for years in the robo report and is an investment manager with condor capital the majority of those clients have all been clients existing relationships its always been a much easier road for incumbents wall street banks without even trying are sitting on big assets in the digital investing space speaking about its you invest platform jpmorgan chase ceo jamie dimon noted on its recent earnings calls selfdirected investing has 55 billion i think robinhood has i think 80 billion the last time i saw or something like that were not sitting here bragging about our product because i would tell you its not good enough yet but its got 55 billion without us doing virtually anything and no marketing and no real stuff like that the scale that betterment and wealthfront have been able to achieve is notable for a product that operates on thin margins and in line with dimons own comments it is not as if the banks have gotten it right either yet with digital investing platforms goldstone said ubs has taken multiple stabs at this concept in recent years working in the past with wealthfront rival sigfig as one example theyve gone down this road before and it has not gone extremely well for them theyve struggled to find a great product to match the market with robo advice he said wealthfront brings one valuable new asset to the ubs deal its large existing customer base which also speaks to why the roboadvisors are finding it hard to stay independent and grow into big public companies what analysts say the robos maybe didnt see clearly at inception was just how expensive it is to acquire customers profitably and to compete with giants like vanguard once they made the move to add roboadvisory services customer acquisition costs have been the thorn in the side of robos since day one goldstone said in the early days they grossly underestimated how much it would cost at first the roboadvisors may have thought a good service and an untapped niche would combine to make wordofmouth marketing enough without a major marketing spend but there are only so many people in silicon valley who have heard of you said michael wong morningstar financial services analyst to be profitable off 25 basis points is hard when you need more customers and word of mouth is not going to do it the incumbent firms  everyone knows them wong said the demographic that the roboadvisors have helped to raise awareness about younger clients and lower wealth clients underserved by traditional advisors is a major battleground for financial advisory firms into the future ubs probably bought wealthfront much more for the customers than the tech wong said to expand into this emerging highnetworth market wealthfront has it that shift hasnt been totally played out yet and the ramifications remain big for the wealth management industry there may also be some benefits to acquiring robos for expertise in direct indexing a concept that is expected to be a significant asset management trend of the future in the same way etfs supplanted traditional mutual funds there is growing belief that direct indexing which allows for more customized mass market versions of managed accounts will be a key wealth management product of the future they have had a significant impact goldstone said but one that seems to be stopping short of commanding valuations that demonstrate an industrys upending my best guess is they were probably gunning for an ipo early on to stay independent and exit through an ipo but its very difficult to compete with vanguard they were the largest roboadvisor in the market within a few years goldstone said getting their brand out there finding new clients and achieving scale all of it is difficult  all of it has been difficult for roboadvisors from the beginning 14 billion is nothing to sneeze at wong said but the valuations are apparently 1 billion to 2 billion and werent going to upset the entire wealth management market and be worth tens of billions not every disruptive story ends with the disruptor getting the biggest win even if the themes they were betting on do prevail roboadvice is here to stay but the era of silicon valleybacked robo platforms may have already reached its heyday it is going to be extremely difficult to launch new independent robos and reach the scale needed goldstone said the independents that got in early and achieved some scale and built a brand its been successful for them he said but most individual investors probably have a robo solution at a financial institution that they are already working with it has really just has run its course in many ways wong said with the tech being adopted and whatever innovations they had adopted by larger players its just part of doing business now to have a digital investment services platform