Robo-advisory firms are creating institutional platforms that will improve the economics and expand the client mix of advisory firms.

The most interesting, and under-reported, trend in the online investment space is how quickly the robo-competitors have migrated toward working with advisors as well as against them a migration that is identical to what we saw from the discount brokerage custodians in the 1990s.

Would YOU call this a trend? Since their founding, Folio, Betterment, Jemstep, NestEgg Wealth, SigFig, Trizic and Motif Investing have all created institutional versions of their services outnumbering the robo competition that is still clinging to the consumer-only model (Wealthfront, Personal Capital, Covestor and FutureAdvisor). The free robo-service the Schwab organization will eventually roll out (to be named Schwab Intelligent Platforms) will be jointly born in the retail and institutional space.

Some robo-firms skipped the retail stage altogether. Upside Financial co-founders Juney Ham and Tom Kimberly created their online advice technology with the goal of launching a state-of-the-art consumer robo-platform. Then, pre-launch, they decided to become exclusively an institutional resource for advisors instead. Why? The providers of advisory and investment services already have the clients and the assets, says Kimberly. We decided it would be better for us to solve challenges and problems in the industry than to sell ourselves directly to the public.

Ramak Fazeli, who markets Motif Investings institutional services to advisors, says his companys advisor services launch was initially an attempt to accommodate advisors already using Motif with their clients. They asked us to create a way for them to onboard their clients digitally with us, he says, and they wanted to be able to keep track of their client portfolios globally. After we did that, he adds, they started asking for other things, like single-rebalance functionality across all clients, and the ability to push a single button that executes all the trades and brings all the portfolios up to the current construction. Before long, we had an institutional platform, and advisors are now a big source of assets for us.

Fazeli says that Motif Investings advisor customers tend to be run by younger advisors who cater to younger clients. This cohort of investors wants to co-participate in selecting motifs and building portfolios. Meanwhile, for established advisors, the new online institutional offerings address a huge and growing need: they allow advisory firms, at very low cost, to service accounts that are smaller than their traditional minimums.

Most advisory firms service the children of their best clients, or individuals referred by their best clients, by creating a bottom tier (the C level) who receive investment management but not a lot of planning or hand-holding, for a reduced fee. This was always an awkward arrangement at best. Over the past 10 years, a handful of advisors created robo-like investment platforms that leveraged their firms own investment research, and, with limited success, marketed these services to other advisors. The most prominent were RamseyInvesting.com by Ramsey & Associates in Seattle, Edelman Online from Edelman Financial, and Wealthbridge, created by R. W. Rog & Co. in Bohemia, NY. The problem? Not many advisors want to refer the children of their best clients to a competing advisory firm.

Today, any advisor can simply plug the institutional version of Betterment, Motif Investings Advisor Platform or Trizic onto their service offering, and provide instant access to portfolios created using the investment research and resources that serve the firms higher-net-worth clients.