Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

Wells Fargo CEO John Stumpf made it clear on Tuesday (again) that the firm wants to bulk up its wealth-management business, calling it the biggest opportunity the bank has.

What was left unsaid was how he'll do that, but one thing is for sure: The methods used by the firm's advisers to attract the first trillion dollars of client money may end up looking much different from those used to gather the next trillion.  

Investment Biz Swells at Wells
Revenue and profit from wealth, brokerage and retirement has grown at Wells Fargo in recent years.
Source: Bloomberg

The popularity of so-called robo advisers -- basically computer algorithms that help guide portfolios without human interference -- is growing rapidly and expected to explode in coming years, especially among the younger generations who are thought to be more comfortable with impersonal but perfectly rational technology and less comfortable with the traditional Wall Street model of trusting all those good-looking people in suits.      

In a report from Deloitte Consulting to be released Wednesday, the amount of assets under management advised by the robots is forecast to surge to $5 trillion to $7 trillion by 2025. 

Deutsche Bank just said it was introducing free software that will automatically build and manage portfolios for German clients. Bank of America Merrill Lynch has reportedly put dozens of employees to work on a robo adviser to be rolled out next year. BlackRock bought FutureAdvisor, and there are efforts making the news from Fidelity, Vanguard, Charles Schwab … the list goes on and on. Not to mention the startups like Betterment and Wealthfront, which helped pioneer the space and have hoovered up assets.   

The Robot Revolution
Gen X and millennials are forecast by Deloitte to make up the bulk of robo-adviser assets in next decade.
Source: Forecasts by Deloitte for 2025.

Wells Fargo has expressed interest in starting a robo product, so the bank needs to decide whether to build its own or buy one. But with no combatant yet in the robo-adviser wars, it begs the question of whether the bank has already arrived to the battle too late. 

It appears so, but a better question may be whether this is even the right fight. The rush to offer some sort of robo product seems eerily familiar to past technology fads. This is certainly the Robo Adviser 1.0 phase and, like all initial attempts to capitalize on technological innovations, it's possible these products end up looking adorably quaint in the rear-view mirror.

The current buzz is over which one of these services will dominate the robo-advice field as the assets start swelling into the trillions. But what if all these early products are ahead of their time but end up behind the curve, looking like the AOL of Internet service providers or the MySpace of social media?  MySpace can redesign its site all it wants, but once the crowds moved to Facebook and Twitter, it was all over.

It's worth noting that the robot advisers have more or less zero track record in dealing with a bear market in stocks, so it's yet to be seen how happy their clients will be after a market rout. Already, firms like Huygens Capital are claiming to take robo advice to the next level with predictive analytics to attempt to tactically manage a portfolio -- more like a robo quant than a robo adviser.

Here is how the Deloitte consultants see the space evolving:

In the future, we will have robo-advice on steroids -- broader, more holistic advice powered by advanced analytics. Just think of the implications, as it could lead to a new world where tech companies own customers and deliver robo-advice (owning the front office functions), while traditional ... firms execute the trades (owning the middle- and back-office functions).

After emerging from the financial crisis with a reputation largely unscathed, at least compared with its competitors, Wells Fargo has an opportunity here to do what it does best: take its time and resist rushing into fads until it's good and ready.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Michael P. Regan in New York at

To contact the editor responsible for this story:
Daniel Niemi at