Robot Wealth Managers

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
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NormR
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Re: Robot Wealth Managers

Post by NormR »

Shakespeare wrote:
As the numbers mentioned in this thread highlight, even 0.3% can add up to real dollars.
That still seems low to me. Recall that a one-decision low-cost balanced fund will still be in the neighborhood of 1%.
The one Dan linked to was about 1% including product fees.
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Re: Robot Wealth Managers

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But remember that these firms don't seem to use the broad based cheapest ETFs. If they did then it would seem low. If these firms take Rob Carrick's advice (subscription required) and buy the cheap broad based stuff with 0.15% MER we're still talking about all-in fees of about 0.5% per year. But that's just the portion north of $1 million. Below that you'll pay another 10 to 20 basis points (+ taxes) so you're not that far off of Mawer Balanced.

But that's with the cheapest ETFs available. As that blog post I linked shows, these firms aren't just looking for the cheapest. Investors may well pay average MERs of 50 basis points or more. Add in advisor fees and taxes and you're at or above 1% for most people. The likes of Mawer Balanced look pretty darn good - still. And if you have a big enough account you'll get lots of attention from a real person who is likely to be well credentialed.

So this is an example of where the media needs to do a better job of scrutinizing the value provided by these firms if they're going to cover every development they way they have been.
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Re: Robot Wealth Managers

Post by DenisD »

Rick Ferri Launching A Robo Advisory
Rick Ferri, one of the most well-known index investors in the world, is launching a robo advisory this summer. His goal is simple: to reach younger investors.
Bogleheads discussion: http://www.bogleheads.org/forum/viewtop ... 0&t=166050
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Re: Robot Wealth Managers

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There is M&A in the sector, Fintech leader Wealthsimple acquires online brokerage pioneer ShareOwner
Wealthsimple Financial Inc., Canada's leading online investing service, announced it has acquired Canadian ShareOwner Investments Inc., the country's first automated investment manager. The acquisition is another example of the growing Canadian financial technology sector, commonly referred to as fintech, continuing to encroach on incumbent players. Wealthsimple now owns one of the 14 discount brokerages across the country, joining RBC and BMO among others.

The combination will uniquely position Wealthsimple as the only automated investing service that controls the end to end investment experience for clients, from trade execution and custody to portfolio construction and advice, enabling future innovation across every element of investing.

"This deal accelerates our mission to make smart investing accessible to everybody," said Wealthsimple CEO Michael Katchen. "It means we can move faster to bring innovation to Canada's financial industry, and we're adding complementary technology, like fractional shares that will help deliver a superior experience to our clients."

ShareOwner has been providing independent investment education and low-cost investing services to retail investors since 1987. Over the last 3 decades, ShareOwner has launched notable innovations like fractional shares, dividend reinvestment programs, and model portfolios. Following the acquisition, ShareOwner will continue to operate its popular discount brokerage under the leadership of CEO Bruce Seago. In addition, it has started supporting some back office operations for Wealthsimple.
There is coverage at both the Financial Post, Millennial-focused Wealthsimple to buy boomer robo-adviser ShareOwner, its first acquisition and G&M, Robo-adviser Wealthsimple to acquire ShareOwner Investments.

As an aside, if you dig in the bowels of FWF, you'll find mentions of ShareOwner and some of the tools they offered, such as Canadian Shareowners Association. Former FWF poster yielder was a big follower and teacher of their methodology for stock analysis. This student has incorporated the learnings into a component of my stock study methodology and it has served me reasonable well over the years.
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DanH
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Re: Robot Wealth Managers

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Not a huge surprise. WS has stated that they want to be running $2 billion by mid-2017 - which is only really feasible if they do at least a couple of sizeable acquisitions. The combined business will oversee $400M but 3/4 of that is from Shareowner (not telling tales out of school...all obtained from public sources).

Mid-year I wrote about this emerging segment of advisors - which included the following regarding competitive threats.
I wrote:In the U.S., discount broker Charles Schwab offers its own Robo-Advisory platform, using Schwab’s own competitively-priced ETFs. They make money on the ETFs but charge nothing for advice. There’s no reason why BMO couldn’t do the same.

BMO already offers an automated advisory service, though it’s expensive and not focused on ETFs. But they have the platform. And they boast the largest ETF family among Canadian banks, which makes them ideally positioned to be a mega Robo-competitor.
And recently it's been reported that BMO is in fact launching a competing service - which was reinforced at an industry event last week in Toronto. If my expectation materializes, BMO will offer the service/advice at rock bottom fees - or for free if they get aggressive - and blow everyone away while funneling more money into their already large family of ETFs. The scale of their ETFs will allow any additional asset based revenue to be hugely profitable.

This is all conjecture on my part. But this will be interesting to watch. No date was mentioned last week but I would be surprised if it was much past next January.
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Re: Robot Wealth Managers

Post by kcowan »

I suspect that all full-service brokers will introduce new cheaper offerings to attempt to retain what business they can when "full" disclosure becomes mandatory.
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Re: Robot Wealth Managers

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kcowan wrote:I suspect that all full-service brokers will introduce new cheaper offerings to attempt to retain what business they can when "full" disclosure becomes mandatory.
Agreed. Robo will become another distribution channel the big banks need. Discount brokers -> Robo advisors -> Bank / full service brokers -> Private wealth management, depending on the level of support and personal service the investor wants.

Robo will get new / young clients, and existing clients defecting from full service advisors to get lower costs.
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Re: Robot Wealth Managers

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finiki has a new page: Robo-advisor.

If anyone is using a robo-advisor, it would be great to read about your experience here.

Comments about the finiki page are most welcome as usual, here or using the ''Help improve this page'' at the bottom of each finiki page. Or, best of all, you can be a geek and edit the page yourself.
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Quebec
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National Bank InvestCube

Post by Quebec »

I'm looking at what National Bank is offering in the robo space. To their credit, the compositions of the offered portfolios are available online, so we can examine their offerings in detail. Here are three samples:
- Growth - 25% Cash + F.I.
- Balanced - 46% Cash + F.I.
- Conservative - 80% Cash + F.I.

Mostly, it's OK, they are using mostly passive, low-cost, Ishares and Vanguard ETFs, especially for stocks. The split between Canadian and global equities is reasonable. There are some surprises though:

1. in the conservative portfolio, there are EM bonds (!?!), as well as 3 actively managed, high-fee ETFs that cover corporate bonds, junk bonds and preferred shares. Less than half the F.I. is in a low-cost, broad market, passively managed bond ETF. There is also 15% cash, which seems like a lot. If I want 15% cash in my portfolio, I can invest it in a HISA instead of paying 1% a year to the robo to hold cash for me!!!!

2. out of the 44% F.I. in the balanced portfolio, only 14% is in XQB, and 30% is in actively managed ETFs covering corporate and junk bonds. Yes, they yield more, but are they appropriate in such amounts for a balanced portfolio?

3. the entire bond allocation of the growth portfolio is in corporate and junk bonds. Personally, with 75% stocks, I would want to be much more conservative with my F.I. and favor Canadian government and provincial bonds, short term investment-grade stuff... Yes, the yields are lower, but there is enough risk on the equity side already.

But what do I know, these portfolios are put together by experts... They must be right... :wink:
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Re: National Bank InvestCube

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Quebec wrote:But what do I know, these portfolios are put together by experts... They must be right... :wink:
But if they were to recommend a simple three or four ETF portfolio, using very low cost vanilla ETFs, how could they justify their fee?

I'm still scratching my head, trying to figure out why someone would want to use such a robo-advisor. ISTM that the principal value of an advisor is hand-holding when things get rough. How comforting is having your hand held by a machine?

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Re: National Bank InvestCube

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ghariton wrote:How comforting is having your hand held by a machine?
May depend on what else 'she' does?
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Re: National Bank InvestCube

Post by Quebec »

ghariton wrote:How comforting is having your hand held by a machine?
Apparently you can call them and speak to a real person. Probably a different one every time though.
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