Alex Chun

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Sorry. I misquoted Schwab’s number – it’s $4bn AUM. Vanguard’s robo-hybrid has $21bn. Not as striking a difference, but still the contrast is still interesting given it’s been around for 7 months.

This is a great article, Monica. I think robo-advisors (and more broadly ETFs) are incredible innovations for the wealth management industry, especially given the plethora of mutual funds out there that are unable to prove that they are worth the fees they charge.

Having said that, I still question Wealthfront as a standalone business. It strikes me as something more appropriate as part of a wider product offering provided by the online retail brokers, rather than as its own company. Robo-advisors should represent a part of someone’s broader investment portfolio, and having a consolidated platform that also provides other options such as self-guided investing and, yes, even mutual fund investments, seems to be a much greater value prop for consumers. For example – Charles Schwab’s Intelligent Portfolios (its robo advisor product) has already blown past Wealthfront’s AUM with $21bn in AUM, despite only being around for a few months. I imagine it’ll be hard for Wealthfront to compete with the resources of the Big 5 retail brokers.

Lastly, the valuations around Wealthfront are astounding. At its 25bps fee rate, $2bn AUM implies only $5M in revenue (generous, since the fee is only applied after the first $10K). With that math, even at $100bn+ AUM, it seems hard for Wealthfront to deserve a $700m value.

On December 13, 2015, Alex Chun commented on Airbnb: A sharing business so you can #BelongAnywhere :

Nice article. My biggest question around businesses built around the ‘sharing economy’ (AirBnb and Uber being the most notable) is where to draw the line between unregulated peer-to-peer activities, and regulated and taxed commercial activities. Is it fare that a substantial amount of business done on AirBnB is by individuals who operate a hotel in everything but name, but don’t have to pay the taxes, obey zoning laws, or have the regulatory/industry oversight to which traditional hotels are subject? I think the power of the sharing economy is incredible, but only to the extent it’s truly used as a means through which to monetize someone’s temporary excess capacity (e.g. empty room), rather than an alternative way to run a business.

Great article on an interesting topic. You mentioned that the FT’s status as a specialist publication allows it to be successful where so many others have failed, and it makes sense that it plays a huge part. But I wonder if the nature of the FT’s specific target customer base – business and finance professionals…a large group who are willing and able to pay subscription fees – contribute to its success. Said differently, if a publication were to adopt the FT’s model but apply it to a different niche, would that be enough to be successful?