Robo-Advisors: The Logical Next Step

As a watcher, creator within, and critic of the robo-advising space, I’ve seen the future unfolding firsthand for a long time now. I’ve written about why I think this robot movement is going to be big. I’ve also written about why I don’t think it’s going to work in its current iteration for many of these firms, in the near-term, as well.

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Financial Advisors: Publish or Perish

Financial Advisors…I don’t know if you noticed it but something happened in our industry, particularly, within the financial blogosphere this last year:

  1. I quit blogging (or did I?)
  2. The bloggers who stayed have started becoming big. Like “household name” big

…Like, have a ‘Brand’ big…

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Paint By Numbers: RoboAdvisors

They say art is in the eye of the beholder so I want to get your take on something I painted in my studio today. I think it’s pretty good, way better than the macaroni art I made last week.

The subjects of this picture are three firms using algorithms to manage your portfolio auto-magically, also generally known as RoboAdvisors: Betterment, Wealthfront, and FutureAdvisor.

I’ve got a working title…”The Robots Are Coming To Eat Your Face Off, And Kill You, Or Maybe Probably Not.” This is my second series about RoboAdvisors. Series one was here, in case you missed it. So, let your eyes behold…

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What’s it like to be really rich?

What’s it like to be really rich? Henry James’, Wings of the Dove…

Milly, the last heiress of all ages, is a girl free from all earthly ties, and as pure as Alpine air. She has never thought about the cruelty or sordidness to which money or the absence of money reduces people. On the contrary, her fabulous money seems to purify and mystify her, as if she were a princess into whose court life nothing disagreeable penetrates. But in reality, the girl couldn’t get away from her wealth…She couldn’t dress it away, nor walk it away, nor read it away, nor think it away;…She couldn’t have lost it if she had tried — that was what it was to be really rich. It had to be the thing you were…”

Morningstar: Mutual Funds Only Kinda Suck…

Part of the wave of revolution happening in the financial services right now is the movement from Mutual Funds to Index Funds, like ETFs. For years, I was a pariah in my old firm for advocating such indexing efforts. Recently Bob Seawright did a fantastic job answering, Why do clients need an Adviser if they index?

And now Morningstar is out with its latest edition of MorningstarAdvisor on the Urban Myths of Mutual Funds. Although it’s not quite the back-slap you’d expect from the leading Mutual Fund ratings company…

One urban myth circulating among investors is that mutual funds have hidden fees of 140 to 200 basis points that are omitted from expense ratios. When these hidden fees are added to a fund’s stated expense ratio, they presumably bring overall annual fund expenses to something in the 2.5% to 3% range. When the additional toll of taxation is taken into account, the total cost of fund ownership is supposedly close to 5% for some funds. It’s enough to send shivers down your spine.

While the terror of taxation on fund shares one continues to hold is real, the 140 to 200 basis points in hidden costs are largely fiction. The idea does have a basis in reality, however. Mutual funds do omit the cost of trading securities from their expense ratios…

The article is chock full of Chupacabra-busting…

Mutual Fund Urban Myths – MorningstarAdvisor