Does Your Stock Portfolio March To The Beat Of Its Own Algorithm?


Barraged by investment firms eager to manage their life savings, many Americans are making their choice—for nobody to manage their stock portfolio. They’re shrugging off investment advisers altogether in a hunt for lower costs, Bloomberg Markets magazine reports in its July/August special Rivalry issue.

Investment firms are eager to manage the life savings of every red blooded American but there’s a problem…not everyone wants a warm blooded advisor to plan out a financial portfolio. Higher costs and risk of falling into a situation where advisors push what they get paid to has many investors turning to a new trend in the financial markets, robo-investing. Now you may immediately think of a person/machine hybrid holding a futuristic calculator but this is different…way different.

Robo-firms are using algorithms to design portfolios based on a Q & A with new clients. Fund giants like the Vanguard Group and Fidelity are throwing their hats in this new ring. These portfolios, according to information from Aite Group, are anticipated to be worth upwards of $60,000,000 in 2015 which is up significantly from 2014’s $16,000,000.

Wealthfront and Betterment have been the “vanguards” (no pun intended) of this new move in financial education driven by who has the lowest fees while offering a quality product both from the investment front and from a planning front as well. Welthfront already has a leg up (or maybe Vanguard does) as nearly 90% of the average Vanguard portfolio is directed by Welthfront’s algorithms, however, neither company has financial relationships in place according to reports.

In fact, Vanguard released its own “robo-like offering” in May, calling it Personal Advisor Services directed at customers with at least $50,000 to invest. Though Vanguard is targeting retirees and “near retirees” the name of the game for many new robo-firms has been “millenials”. Fidelity on the other hand, teamed up with No. 2 robo-firm Betterment in October to direct advisers toward Betterment’s software, which can pick portfolios and automatically rebalance them to cut time and costs. Fidelity receives a referral fee (of an undisclosed amount).

“Financial firms can no longer wait for the emerging affluent to appear at their doorstep when they have enough assets,” says David Canter, head of Fidelity’s unit serving independent advisers. “You have to think about them now.”

Charles Schwab Corp. may actually be the one to reap the most reward at this point and right now you’re probably asking why…this hasn’t been mentioned once in this article. The largest independent U.S. brokerage by client assets launched a robo-option for retail investors on March 9 and By the end of May, the new program had $2.4 billion in client money and about 33,000 accounts…For everyone looking to gain investment clients, it’s Game Time!


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