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JP Morgan unveils low-cost robo advisor

JP Morgan Chase has launched a digital investing service in the US called You Invest Portfolios. The robo-advisory roll-out comes after a year of user trials of the new products at 27 of the bank’s Brooklyn, New York branches.

For an annual fee of 0.35% of assets, or 35 basis points, JP Morgan will put users into an investment portfolio made up of the bank’s exchange traded funds (ETFs).

While the fee is in line with that charged by rivals such Morgan Stanley for similar services, JP Morgan is going further than most in waiving fees for the underlying investments.

The ETFs that the bank will use range in cost from about 2 to 50 basis points, and users will typically save an average of roughly 15 basis points in fees through the service, says Jed Laskowitz, the JP Morgan executive who runs You Invest.

Robo-advisory pioneers

JP Morgan’s move is regarded as a bid to win market share from competitors and broaden the pool of Americans who are invested in the stock market. Surveys suggest that only about half of Americans own stock through mutual funds, retirement accounts or individual equities, and just 31% of those below the age of 30 own shares.

Using digital channels enables JP Morgan to profitably manage portfolios for people with no more than $2,500, the minimum amount for its new product. Banks with full-service financial advisers typically target far more affluent investors with far more money. JP Morgan could cut the management fee on You Invest Portfolios further for those who invest more with the bank, suggest insiders.

This would tally with the comments of JP Morgan CEO Jamie Dimon, who in 2016 suggested that that he could give clients free brokerage trades or a no-cost robo-adviser as part of a bundle of digital banking products. He likened it to the approach Jeff Bezos took with Amazon’s Prime subscription service.

“Customers can now bank, save, borrow and invest in one of our 5,000 branches as well as on the go,” said Thasunda Brown Duckett, CEO of consumer banking at Chase. “Our firm continues to invest in technology and experiences that help customers make the most of their money, so that they can makes the most of their lives.”

Robo-advisers were pioneered a decade ago by automated investment services that launched just over 10 years ago, such as Wealthfront and Betterment, which used algorithms to pick low-cost investments suited for a customer’s risk appetite. Mutual fund giants including Vanguard and Blackrock soon released their own versions, and banks with major wealth management arms like Morgan Stanley and Bank of America followed suit.


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