[HN Gopher] UBS Acquires Wealthfront for $1.4B
___________________________________________________________________
UBS Acquires Wealthfront for $1.4B
Author : blobbers
Score : 234 points
Date : 2022-01-26 17:22 UTC (5 hours ago)
(HTM) web link (www.reuters.com)
(TXT) w3m dump (www.reuters.com)
| TuringNYC wrote:
| I'm honestly shocked at how primitive the big firms' offerings
| are. For example, JPMChase's bank account is smart enough to see
| a payroll deposit and give you a comment modal suggesting that
| you invest the money with JPM's investment platform
| (YouInvest/whatever)
|
| Log into the investment platform and you're back in 1993. They
| literally have no drip-investment style offering. They want to
| charge you 100bps to "manage" your money, or you get a
| broken/buggy online broker with barely any functionality.
|
| Why the heck isnt JPMChase buying one of these platforms?!?
| JumpCrisscross wrote:
| > _Why the heck isnt JPMChase buying one of these platforms?!?_
| ]]
|
| Broadly speaking, the retail market can be segmented on two
| axes: net worth and involvement.
|
| Low net worth, high involvement are day traders: they are
| profitable through fees, PFOF, _et cetera_. High net worth,
| high involvement doesn't tend to exist long enough to
| specialise in; they're, professionals, have better things to do
| or lose their money.
|
| Low net worth, low involvement is patient capital. Not super
| profitable _per se_. But the most likely to develop into the
| last category: high net worth, low involvement; the money
| maker.
|
| Robo-advisers targeted the third category. They got more of the
| first. Those not only bolted to crypto and Robinhood. They also
| incurred higher costs to the firm while promising less
| development potential to the fourth category. The actual third
| category participants, to a large degree, don't need much more
| than was available in 1993, or at least are savvy enough not to
| find themselves paying for it.
| TuringNYC wrote:
| >> The actual third category participants, to a large degree,
| don't need much more than was available in 1993, or at least
| are savvy enough not to find themselves paying for it.
|
| I'd disagree with this. In 1993, you couldnt do fractional
| shares, or auto-invest, or pie-based investments. In 1993,
| you couldnt purcahse $500/wk of BRKB/AMZN/TSLA because there
| was no product like that short of paying a mutual fund
| 150bps. You couldnt tax-loss harvest (like with WealthFront)
|
| You can get that now with M1, FolioFN (GS), ShareBuilder
| (RIP). It is low investment and high-stickiness.
|
| You're noting net work and involvement and profit, but I
| think stickiness is another factor to focus on.
| JumpCrisscross wrote:
| > _In 1993, you couldnt do fractional shares, or auto-
| invest, or pie-based investments. In 1993, you couldnt
| purcahse $500 /wk of BRKB/AMZN/TSLA because there was no
| product like that short of paying a mutual fund 150bps. You
| couldnt tax-loss harvest (like with WealthFront)_
|
| Fractional shares are a day-trading tool. Apart from that,
| yes, you're citing real innovations. (Others include a
| dramatic reduction in trading costs and ETFs.) To the
| broader point, none those are unique (any more) to the
| robo-advisers.
| TuringNYC wrote:
| >> Fractional shares are a day-trading tool.
|
| Absolutely not, polar opposite. If i'm a buy-and-hold
| investor who wants to set-it-and-forget it invest auto
| every week, Fractional share purchase are the only real
| way to consistently purchase. How would you buy AMZN
| every pay period if a single share is more than your
| entire investment amount.
| JumpCrisscross wrote:
| > _How would you buy AMZN every pay period if a single
| share is more than your entire investment amount_
|
| Most long-term, low-involvement investors wouldn't.
| They'd buy an ETF. The exertion of selection effect for
| Amazon versus the rest of the market is a high-
| involvement action.
| TuringNYC wrote:
| Going back to the top level, JPM's investment site, as
| far as I can see, cannot even repeat-purchase an ETF.
|
| Oh, and if they wanted to invest $300/pay period into the
| S&P 500, note that SPY is currently at 440.
| https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-
| sp-5... so absent fractional shares, you cant...
|
| And if you invest monthly, what do you do, buy 1 share
| (different amount per month)? Or do you just give up and
| go to Vanguard/Fidelity/etc? This is sort of my point,
| how is something as basic as repeat-invest not available
| on the world's biggest bank?
| JumpCrisscross wrote:
| > _JPM 's investment site, as far as I can see, cannot
| even repeat-purchase an ETF_
|
| Do you mean automatic deposits and investments? That's
| table stakes. They offer it. They aren't advertising it
| because fire-and-forget is 99% of the pitch of the wealth
| management industry. (That they're messaging it badly is
| in no way challenged.)
|
| With respect to smaller dollar amounts, the traditional
| answer was mutual funds. Those usually have $1 minimums.
| They were historically shit when it came to fees, but now
| typically come in below 50 bps for broad-market funds.
| JackFr wrote:
| In 1993 the NYSE still quoted prices in 1/8's, and if you
| wanted to get a quote you either had to own a Quotron or
| call your broker.
| TuringNYC wrote:
| And you'd ask your broker for a chart, and they would
| print a dot matrix printer version of the chart and snail
| mail it to you in 1993!
| dartdartdart wrote:
| Are you saying m1 also offers set and forget investments?
| Seems like folioFn and sharebuilder arent operating anymore
| TuringNYC wrote:
| Yes, M1 offers what ShareBuilder used to offer, except
| with community pies, etc. https://www.m1finance.com/how-
| it-works/invest/ You set the portfolio, set the auto-
| amount, and forget about it.
|
| FolioFN got purchased by GS.
|
| ShareBuilder was purchased by CapitalOne and flushed down
| the toilet immediately.
| Spooky23 wrote:
| They can't compete at scale for small potato clients. They want
| high net worth people to work with a guy. Ie the stereotypical
| dentist.
|
| Honestly it's probably a good thing. Chase is pretty awful at
| basic retail banking. Really only makes sense if you live in
| Manhattan or something where there are like 3 mega banks in
| every corner.
| TuringNYC wrote:
| I'm surprised to hear this take. I find Chase to be the best
| bank I've ever worked with -- personal accounts, business
| accounts, everything. Customer service is top notch. Website
| is great. I'd love to hear your choices for a top retail
| bank.
|
| Yes, i'm in the NY area, so true on branch location issue.
| But how often do you have to visit a branch if you have good
| systems? The branch is usually for when systems fail.
|
| Not the best lending bank, and def not the best investment
| platform. I'm not sure why they cant be all three (organic or
| m&a) given the high synergy.
| Spooky23 wrote:
| The best banks for most individuals are almost always small
| regional banks or credit unions.
|
| The credit union I use has 7% lines of credit, mortgage
| rates that are consistently within 5 basis points of the
| lowest and average hold time to an agent <3m. But... their
| business banking is weak and it's not really a good place
| for a high net worth person.
|
| I think big banks tend to never be great customer
| experiences becuase the internal incentives aren't there.
| Retail banking is a sales funnel, and why would a brilliant
| leader want to run retail? It would be a pay cut. The
| "brand name" of a major bank used to mean you could cash
| your checks anywhere, etc. that's all dead.
| throwusawayus wrote:
| I fully agree with GP, my experiences with Chase have been
| quite poor even in the NYC region.
|
| Ahead of buying a home in ~2015, I was holding a lot of
| cash, and Chase upgraded me to Chase Private Client. Seemed
| good at the time, perks like free museum visits and such,
| and they said I could retain the status for at least a year
| even after reducing my account balances.
|
| Private Client sucked. My "private banker" was irritating
| at best. Constant sales pressure shilling their investment
| products, which had a 1% management fee, on top of being a
| basket of a hundred different actively-managed mutual funds
| which also had their own high fees. Hard pass.
|
| I looked up my "private banker" on LinkedIn and he was
| literally a parking attendant at his previous role.
|
| I moved out of NY not long after this, and switched out of
| Private Client, although I did keep a small amount in a
| lower Chase tier.
|
| A while into the pandemic, I started getting emails from
| Chase about how "my local branch" was closing (always some
| random Chase location in Manhattan). Happened repeatedly
| for different branches, sometimes ones I'd only visited a
| single time while running errands somewhere in the city.
| This despite the fact that when I moved out of NY many
| years ago, I fully updated my address in Chase's systems,
| and they should surely know I do not live in NY anymore.
| tennis_sort wrote:
| JPM have just made a $12b investment to fix that:
| https://www.jpmorganchase.com/news-stories/tech-investment-c...
|
| I'm aware that these investments often go south. I've seen
| HSBC's foray into "Fintech" and it was rough.
| im_asl wrote:
| That's their annual tech spend. Most of that goes to keeping
| the lights on. Not a lot of innovation.
| rco8786 wrote:
| > how primitive the big firms' offerings are
|
| My take (as a previous employee at Betterment):
| Wealthfront/Betterment/et al came out to much fanfare and the
| promise of disrupting the traditional wealth management
| industry.
|
| At first, it seemed like they were right. AUM growth was
| looking like a hockey stick...this caused some panic at the big
| firms' who hurried to launch their own offerings (this is like
| 2015-ish) which were minimal at best, and still mostly just
| "marketing products" - a thin roboadvisor veneer designed to
| drive users into their traditional businesses.
|
| Over the next 2-5 years and up to now, it is becoming/has
| become obvious that roboadvisors are not, in fact, going to
| disrupt the industry and it's rather a race to the bottom in
| pricing with razor thin (or non-existent) margins...so the
| actual robos have largely stagnated and the big firms stopped
| investing into their own solutions.
| hotpotamus wrote:
| > it's rather a race to the bottom in pricing with razor thin
| (or non-existent) margins
|
| Isn't that the point of automation? Doesn't the saying go,
| "your margin is my opportunity"?
| rco8786 wrote:
| If you can get the volume, yea. But seems like the total
| robo market is smaller than everyone thought.
| mcgin wrote:
| JP Morgan purchased Nutmeg last year [0]
|
| [0] https://media.chase.com/news/jpmorgan-chase-enters-
| agreement...
| somethoughts wrote:
| I suspect you are on to something. Maybe they were waiting for
| valuations to return to earth? The make versus buy decision was
| much harder when these platforms were richly valued.
|
| I could a lot of acquisitions in the coming months as capital
| moves out of growth at all costs fintech space and startups
| need a lifeline.
| TuringNYC wrote:
| I think the "build" can be considered a clear failure at this
| point, it would take 10min on the JPM "platform" to see that.
| Not acquiring ShareBuilder was a major loss, especially given
| that CapitalOne purchased ShareBuilder, took the customers,
| and killed the platform. Not sure why the platform couldnt
| have been spun off to JPM (?except perhaps competition?)
|
| GS purchased FolioFN, which was a lesser player, but still a
| decent platform. JPM is going to have to gulp down M1 Finance
| and pay for being so slow to the acquisition game <-- My
| prediction!
|
| Online brokerages selling order flow are very profitable, so
| even the "buy" decision seems like a no-brainer given the
| obvious monetization route. DRIP-style investment is even
| stickier -- you set it and forget it. Make it part of the
| Premier/Sapphire tiers and people dont want to move at all.
| somethoughts wrote:
| No doubt building is always harder than it looks and it
| looks like JPM tried to build with Finn and stopped awhile
| back. GS seems to also have Marcus which is still going at
| least?
|
| I wouldn't count JPM out though. I'd imagine they have been
| bulking up on cash by taking on debt for future
| acquisitions while interest rates were/have been low. They
| know this game well.
|
| Now that interest rates are starting normalize - they can
| now go pick the best of the best them - be it HOOD, SOFI,
| etc. at more reasonable valuations (or at least 50%+ of
| their 2021 peaks).
|
| Does HOOD at $50B make more sense or maybe just wait until
| it hits $8B. Plus the DAUs are more stabilized now that the
| hype has died down. And you get Dodd Frank
| compliant/audited accounting data instead of VC style
| EBITDA/DAU only data?
|
| In addition they can pick based on who's app is actually
| the most sticky/metrics and get to see all the apps
| internal metrics while doing "due diligence for a potential
| aquisition".
| blobbers wrote:
| A lot of you likely invest in a boglehead style.
|
| Wealthfront was an attempt to automate that while adding some
| bells and whistles on top; tax loss harvesting, smart beta, etc.
|
| Curious to see how they succeed as part of UBS. I thought
| Marcus/Goldman was going to buy them personally, so a bit
| surprised UBS is getting in on this game.
| mbesto wrote:
| boglehead here. Switched off of Wealthfront awhile back. AFAIK
| they wouldn't outperform a three-fund portfolio.
|
| I actually wouldn't mind a platform that uses my brokerage as a
| backend and lets me do % allocations on 3~4 funds,
| automatically identifies rebalance opportunities and tax loss
| harvesting. Basically nudging me like 3~5x per year. I'd pay a
| flat fee to do that.
| prepend wrote:
| When I looked at it the fees were way to high to justify to
| bogelheads.
|
| What is strange to me about robo advisors is that they are
| still charging a management fee instead of a flat fee. The
| algorithms are really basic and don't have any real time
| changes so it seems weird to charge 25-50 basis points for
| what's basically just an interview and time based rebalancing
| with some formulas that aren't really better than existing
| ETFs.
|
| I've been expecting this to just be a feature for vanguard and
| fidelity since the "advise" could just be client side
| automation rules that nobody wants to build.
| xur17 wrote:
| Agreed. To me target date retirement funds honestly make more
| sense for most people.
| tinalumfoil wrote:
| I'm not sure about that. Targets funds fees are generally a
| percent not flat, you have less control over your money
| (which if you're doing a robo-advisor you probably have
| somewhat bespoke investing requirements) and they only make
| sense for tax-advantaged accounts (see [1]).
|
| Plus, people invest for reasons other than dated retirement
| targets.
|
| [1]: https://www.wsj.com/articles/vanguard-target-
| retirement-tax-...
| teej wrote:
| Tax loss harvesting alone has more than paid the 25 bps fee
| that Wealthfront charges. It's a no-brainer to me. I'm very
| happy with Wealthfront.
| atuladhar wrote:
| Marcus bought HonestDollar, which is in the same space, a while
| ago, and has rebranded it as "Marcus Invest" *
| https://www.honestdollar.com/ *
| https://www.marcus.com/us/en/invest
| msoad wrote:
| Did anyone get any real beta out of it for a sustainable
| period?
| blobbers wrote:
| beta is correlation to the market (usually refers to SPY
| correlation). Not sure what you're saying.
| msoad wrote:
| sorry I meant alpha. oops
| im_asl wrote:
| *Alpha
| endisneigh wrote:
| How much better has wealth front done vs SPY, fee adjusted?
|
| Imho all robo advisers are a waste of money. If they were
| actually effective they'd use their own services themselves as
| opposed to sell them to retail.
|
| The latest crop of businesses really are marketing value adds.
|
| See: https://longbets.org/362/
|
| Other people have done similar bets and they all lose on a risk
| adjusted, fee adjusted basis.
| Beaver117 wrote:
| The tax savings I get from them is much more than the annual
| fee. I converted the portfolio to 100% US stocks btw. Sure I
| can harvest losses myself but that introduces emotion and
| watching the market carefully.
| endisneigh wrote:
| Don't understand this. The tax savings only come from
| realized loses. In the long run SPY will likely best that
| including your "savings".
| extesy wrote:
| This article from their help center explains the
| methodology: https://support.wealthfront.com/hc/en-
| us/articles/209348486-...
| dartdartdart wrote:
| How do you do this? Isn't max risk like 45% US stock?
| Beaver117 wrote:
| You can lower or remove the other areas. Also can add
| direct indexing.
| lotsofpulp wrote:
| These investing middlemen have all been obviated by automation.
| No one is beating the 0.03% to 0.15% expense ratios for index
| ETFs/Target Date Retirement Funds from
| Vanguard/Schwab/Fidelity.
| Glyptodon wrote:
| Schwab at least has terrible UI and doesn't always have
| accurate numbers. (For example, their GL/share for one of my
| mutual funds reports the wrong price/share, using the same
| value for every purchase, while viewing the history tab I can
| see the actual prices from reinvested dividends...)
|
| Not saying they aren't saving you the fees, but not a lovely
| experience.
| endisneigh wrote:
| Agreed completely. I don't know how anyone can justify 10
| times the fees using wealthfront for non trivial amounts of
| money.
|
| I personally have many friends who are very happy with
| betterment and wealthfront which is good. When I ask them
| about their returns in the past couple years they say that
| the stocks have done amazingly.
|
| When I tell them SPY would've given them higher returns and
| lower fees they're skeptical, and lo and behold when I
| actually show them they're shocked.
|
| I feel these companies survive on sheer inertia
| tymekpavel wrote:
| You assume that most people who want to invest even
| understand what SPY is, what a proper allocation looks like
| between stocks and bonds, what tax-loss harvesting or
| rebalancing is, etc. For those folks, robo-advisors provide
| a huge value-add in making it really simple to invest
| responsibly. If they were to do it on their own, they
| probably wouldn't know where to begin.
| endisneigh wrote:
| The kind of person who is using a robo adviser will
| probably know what SPY is, and even if they don't that's
| the purpose of my post.
|
| I've yet to see evidence that any actively managed fund,
| including robo advisers, outperform SPY on a risk
| adjusted and fee adjusted basis.
| hedora wrote:
| One reason they've underperformed a bit is because they
| have a lower risk profile than SPY.
|
| When the market crashes, I expect their autorebalancer to
| make a killing.
|
| It's been hard to compete with "stick all your money into
| the biggest US companies" for the last few years, but those
| years weren't typical.
| PascLeRasc wrote:
| We could also tell you that VOO gives you the returns of
| SPY with 1/3 the fees, or that VT gives you much better
| diversification.
| tinyhouse wrote:
| I don't know what are Wealthfront's fee, but not everyone
| wants to put all their eggs in SPY. Wealthfront (and other
| similar services) let you pick a risk score, and based on
| that invest in lots of different things. Most people have
| very diversified Wealthfront portfolios. They also claim to
| help with tax harvesting. Since SPY had an amazing run it
| performed better than your friends' accounts, but it
| doesn't mean it will keep outperforming in the future. It's
| a riskier investment.
|
| Now, obviously you can also create a very diversified
| portfolio by yourself. That's totally fine if you know what
| you're doing and OK spending the time doing it.
| lotsofpulp wrote:
| A target date fund suffices for most people. And I would
| need evidence to believe that Wealthfront's fees are
| offset by the tax savings and increased complexity for
| 95% of people.
| Beaver117 wrote:
| Not 95% of people but if you have capital gains from RSUs
| wealthfront losses can deduct from that. Not limited to
| $3k/year.
|
| However generally they harvest only a few % of your
| portfolio
| cheonic8492 wrote:
| > Imho all robo advisers are a waste of money.
|
| Robo and human financial advisors provide emotional hand-
| holding and comfort.
|
| Same reason why you trust a doctor, despite doctors
| underperforming (intelligent) self-directed health and
| nutrition research.
| endisneigh wrote:
| > Same reason why you trust a doctor, despite doctors
| underperforming (intelligent) self-directed health and
| nutrition research.
|
| I'm skeptical of this claim. What's "intelligent" research
| mean?
|
| Index funds are literally sit it and forget it. Even easier
| than robo advisers. With year retirement funds you even get
| auto balancing with the same ease.
| [deleted]
| 310260 wrote:
| > self-directed health and nutrition research
|
| That's a bold statement considering the anti-vaccine climate
| today. The value in doctors isn't necessarily what they've
| learned but instead what trends they've seen personally and
| local to your area.
|
| I do agree human financial advisors are mainly a tool for
| comfort. I've got one and most of our conversations
| instigated by him are relationship-building and not
| necessarily aggessive-fund-strategy type talk.
| RandomLensman wrote:
| Self-directed surgery? Joking aside, providing structure to
| investments and investment decisions is probably helpful for
| some.
| cj wrote:
| > How much better has wealth front done vs SPY, fee adjusted?
|
| That comparison isn't really a good way to evaluate based on
| since it doesn't account for risk, only reward.
| endisneigh wrote:
| Ok, but even if you pick an equivalently risky proposition
| with a robo adviser you'd inherently make less money due to
| the fee differential.
|
| Furthermore if robo advisers really could make more money on
| a risk adjusted basis it would literally make them more money
| to use their own service than to sell it.
| cj wrote:
| Other than robo advisors, what service exists where I can
| schedule a weekly transfer and automatically invest across
| 6-8 asset classes? (Many 401k providers do this, but I'm
| not aware of any post-tax investment accounts other than
| robo advisors)
|
| If there's a single ETF that will do what Wealthfront and
| others are doing, I'd switch away in a heartbeat if the
| fees were lower.
| astrange wrote:
| Why does Vanguard sell you ETFs instead of keeping them for
| themselves?
| endisneigh wrote:
| Vanguard is not famous for actively managed funds.
| alasdair_ wrote:
| >Imho all robo advisers are a waste of money. If they were
| actually effective they'd use their own services themselves as
| opposed to sell them to retail.
|
| One of the benefits is tax-loss harvesting. (https://www.invest
| opedia.com/terms/t/taxgainlossharvesting.a....) This is
| essentially free alpha. You can do it yourself but it's a pain
| to do correctly.
| tedsanders wrote:
| My understanding:
|
| The biggest benefit of Wealthfront is automated tax loss
| harvesting, not stock picking.
|
| The biggest cost of Wealthfront is that when you leave you
| either (a) keep a humongous pool of individual stocks to
| eventually unwind or (b) liquidate and incur unnecessary
| capital gains.
| astura wrote:
| >robo advisers are a waste of money
|
| For the informed investor, yes, however they are a giant step
| above the "financial advisors" (mostly insurance salesman) that
| uninformed investors otherwise would end up with.
|
| If you otherwise wouldn't invest or would go to a non-fiduciary
| advisor, then the fee is worth it.
| endisneigh wrote:
| I don't disagree but my point is that an uninformed investor
| would be better off financially with a straight index.
| astura wrote:
| Um... What?
|
| If you know what an index fund is, how to purchase index
| funds, and know which index funds to invest in, by
| definition, you are not an "uniformed investor." You might
| argue "... rabble rabble you should know these things..."
| but that doesn't change that a large portion of the
| population doesn't and is extremely overwhelmed by it.
|
| I've never used Wealthfront personally but I assume its
| basically like a bank account - just transfer money in and
| everything else is taken care of for you. That's a really,
| really valuable service and it's well worth the small fee
| for some percentage of population. Otherwise they'd 1) not
| invest and lose out on gains and dividends or 2) lose
| massive amounts of money buying financial products sold to
| them by "financial advisors" with a 6% load and 1% fee.
| (Not an exaggeration)
|
| Is it a service for me? No. But not every service is
| something I'd be interested in, that's ok.
|
| My little cousin wanted to save more for retirement and
| heard about IRAs. He asked me how to set up and IRA and
| recommendations on what company to use. I recommended
| Fidelity with just an s&P 500 index to start. He got really
| overwhelmed even though I offered to help him click-by-
| click. He decided not to set up the IRA until he found
| Wealthfront. He loves the simplicity and that everything is
| taken care of for him. He's really happy he can save for
| retirement without worrying about doing something "wrong."
| Now, my cousin is a smart guy, so I think he'll move past
| Wealthfront eventually once he learns more, but it's really
| useful for him now.
| endisneigh wrote:
| What you're saying is literally the same with fidelity,
| Schwab, vanguard, etc using an index.
| dartdartdart wrote:
| Wealthfront's value is that the unpassionate investor can
| set and forget it, instead of manually transferring every
| month
| Scoundreller wrote:
| One US strategy that can beat ETFs is the part where the first
| $3k in capital losses per year can be applied against income.
|
| So if you owned every stock in the index directly, one could
| cycle the losers around a bit (there will be at least some each
| year) to maximize this write off against income.
| endisneigh wrote:
| This doesn't do what you think it does. It's tantamount to
| timing the market which generally is a losing strategy. Not
| sure if you're being sarcastic
|
| Tax loss harvesting really only works in the long run if you
| know which stocks won't recover.
| hedora wrote:
| Their computer sells stuff and then buys stocks that are
| heavily correlated to the sold stock.
|
| Later, it unwinds the imbalance to avoid realized gains and
| wash sales. Doing that without impacting long-term returns
| is one of their biggest value adds.
| endisneigh wrote:
| My point is that even if it was literally the same stock,
| unless you know that you bought at the relative bottom
| all you're doing is needlessly incurring loses.
|
| For example you're better off just buying the dip, then
| selling, and paying taxes (even with harvesting) and
| repurchasing assuming the stock recovers and you don't
| mind fronting the capital
| Scoundreller wrote:
| Hence the emphasis on cycling things around. You're not
| trying to cut and run, but retain exposure while
| crystallizing the loss.
|
| I'm not in US, but what are the rules about buying back a
| stock that you just sold?
|
| In Canada, it's a 30d wait for the loss to count, but you
| can buy back another similar company/index the next minute
| and your loss still counts.
|
| If the price of oil craters and you sell your -10% Exxon
| and buy -10% Chevron, you're not timing the market but you
| are crystallizing a loss.
|
| Or change between Solactive and MSCI-based index funds
| because they're "only" 95% identical.
| blobbers wrote:
| You can do it using basket ETFs. The IRS doesn't consider
| them "exact" replicas. So if VOO drops, you can harvest
| using SPY and maintain the same exposure, then switch back
| to VOO a month + few days later.
| Scoundreller wrote:
| It gets harder to pull that off once you're a long-term
| holder
| jldugger wrote:
| Setting aside whether TLH is saving money or simply borrowing
| it from future tax liabilities, how much is 3k in capital
| losses worth to you? At what point does the 0.25 expense
| ratio cost more than the benefit to you?
|
| By my calculations, the breakeven AUM is around $240k,
| assuming you always have 3k cap gains to offset.
| Scoundreller wrote:
| It's more of an argument for how lots of individual
| holdings could beat an ETF, in USA anyway. If your
| commissions are free anyway. Lots of paperwork tho.
|
| For all I know, these robo-advisers just buy you ETFs.
| jldugger wrote:
| I believe the discussion is about what Wealthfront is
| doing to earn their 0.25% fee. "Tax loss harvesting"
| seems unpersuasive.
| devoutsalsa wrote:
| I use Wealthfront. Performance vs SPY is comparable, but it can
| depend on your risk preferences. I like it because it abstracts
| away the underlying securities & I don't have to worry about
| it. I also like their feature that lets you borrow against your
| portfolio at a fairly low rate (less than 4% for me), which is
| a painless way to tap into credit if you need to for pick a
| reason. I think it's a great option for anyone looking to keep
| investing as simple as possible.
| endisneigh wrote:
| The comparison isn't really performance. It's more fee
| adjusted returns. Obviously Wealthfront likely has an index
| itself that it uses, but the fees are 10X (0.03 for Fidelity
| be around 0.3 for Wealthfront).
| dartdartdart wrote:
| Are you comparing this to fidelity's target date retirement
| fund?
| bt3 wrote:
| My first experience with Wealthfront was an IRA. After a short
| period (<year), I realized it was rather simplistic to take a
| predictable regular deposit and split it across a few ETFs to
| stay on track for their recommended portfolio. I ended up opening
| a taxable account to take advantage of tax-loss harvesting
| (materially more difficult to do myself). I'd be curious what
| proportion of their AUM sits under taxable vs retirement
| accounts.
|
| Nonetheless (forgive the plug), I ended up building a simple app
| that would help me automate the thinking of balancing my
| portfolio. Here's an example using a Wealthfront-genereated
| portfolio (ETFs + targets):
| https://correctmyportfolio.com/scenario/share/YISu5jI3
|
| Turns out figuring out where to optimize a portfolio to a target
| without selling, or other rules (like sell thresholds, cash
| buffers, etc.) is a bit more complicated than Excel would allow.
| pyrrhotech wrote:
| Interesting, the figure does seem quite low to me. Boglehead
| passive investing has worked really well for the past dozen
| years. I expect the next 10-15 to be much more challenging given
| the extremely high starting valuations and end of the low
| interest rate and QE tailwind. I've been building algotrading
| models to help tackle the challenge of when to hedge at
| https://grizzlybulls.com
| blobbers wrote:
| Is your website built on some platform? Do you have any
| customers?
|
| How does your platinum plan work?
| pyrrhotech wrote:
| Website is built with NextJs. The models are all built with
| NodeJs--custom backtester framework, and the execution
| framework and data fetchers are also in Node and leverage a
| few open source libraries and currently only works with
| Interactive Brokers.
|
| We just launched mid December, and currently have 16 paying
| subscribers and 178 free members. MRR about $2500. The
| Platinum plan can be either implemented via API, email
| notifications or a managed account in which case after some
| legal paperwork, we set up a second user in Interactive
| brokers with trading authority that executes trades based on
| the signals (hedging via ES futures).
| blobbers wrote:
| This is a pretty regulated market. How did you set up the
| managed account?
| rattray wrote:
| Honestly surprised this is so low. Have they been doing poorly?
|
| How does Betterment compare these days?
| trimbo wrote:
| Betterment has ~$30bn AUM. Neither that nor Wealthfront's $27bn
| AUM are considered a lot in that industry. My brother-in-law
| works at a midwestern wealth advisor most have ever heard of
| that manages $10bn. There are a lot of small firms the $1-$10bn
| range.
|
| And those advisors typically take 1+%/yr. At 0.25%, Wealthfront
| would have had to have $40bn AUM to have equivalent revenue,
| not to mention WF took $200M in VC money to build it.
| [deleted]
| subsubzero wrote:
| Back in 2015 I put some of my money into wealthfront, despite the
| market doing well at the time, my wealthfont fund which was
| heavily stock balanced did somewhat poorly. This was over a
| year's time so not short lived by any means. I pulled my money
| out and invested into stocks I chose and never looked
| back(typically get 10-15% returns a year). I would like to hear
| other people's perspectives about how their wealthfront funds did
| as my colleagues did the same as me and left wealthfront as well.
| fullshark wrote:
| I left after I realized the tax loss harvesting was capped at
| 3k a year
| dominotw wrote:
| > Back in 2015 I put some of my money into wealthfront, despite
| the market doing well at the time, my wealthfont fund which was
| heavily stock balanced did somewhat poorly. This was over a
| year's time so not short lived by any means. I pulled my money
| out and invested into stocks I chose and never looked
| back(typically get 10-15% returns a year).
|
| exact same sequence. I was surprised how poorly it
| underperformed.
| pssdbt wrote:
| Interesting, I started in 2017 and am up 40.58% all time today.
| akashshah87 wrote:
| If you had put money in VTSAX on 1/26/2017 and reinvested
| dividends, you would be up 101.91% with an annualized return
| of 15%
| Beaver117 wrote:
| That's not the same. Money doesn't just appear all at once
| ready to dump on the market, we get and invest it every
| paycheck. So average cost basis over time gets higher as
| you make purchases
| odonnellryan wrote:
| annualized return is annualized return, his strategy gave
| him < 9% annualized return and that is being generous,
| saying he's invested for 4 years not 5.
|
| if you look at SPX returns over the last four years, 2018
| was a negative year but each year after was between 16%
| and 28%. also 2017 was over 19%.
| dan_quixote wrote:
| I can't speak for Wealthfront, but managed "funds" are
| typically balanced across high and low risk securities. Thus
| they will obviously lag behind even index funds like SPY/QQQ.
| Where managed funds tend to show benefits is in times of high
| volatility or downturns. Ask yourself how many downturns you've
| seen in the age of Wealthfront. Because I count 0. And 10-15%
| yearly returns aren't exactly impressive in the last 12 years.
| SPY stomped those numbers:
| https://finance.yahoo.com/quote/SPY/performance/
| zie wrote:
| > This was over a year's time so not short lived by any means.
|
| 1 year of investment data is useless. An investor will be
| invested for their lifetime, we barely have decent data for 1
| investor's invested lifetime(about 50 years). A decade
| comparison is arguably the bare minimum, you really want 20
| years, as investments tend to be cyclical by a decade or so.
| skeeter2020 wrote:
| >> I pulled my money out and invested into stocks I chose and
| never looked back(typically get 10-15% returns a year)
|
| You must be one of:
|
| 1. lucky 2. a genius 3. a crook 4. haven't invested on a long
| enough timeframe.
| Arcuru wrote:
| Given the stock market returns over the last five years, it's
| definitely #4.
|
| Everybody invested in broad market index funds has been
| making those returns the last few years.
| subsubzero wrote:
| well it helps that stocks have mostly gone up in the past
| 7-8 years :) but I typically avg. about 10% a year, one
| year was a down year but most years its about that.
| hedgehog wrote:
| Depending on strategy you can do ok, I'm up over 20%/year
| going back 15ish years. There's certainly a lot of luck
| involved but also tolerance for volatility.
| TameAntelope wrote:
| Funny, I'm up 45%/year going back 30ish years, since
| we're on the Internet just saying things.
| ShakataGaNai wrote:
| I started in 2016, other than 2018 (down 8%) I've been up
| ~10-25% each year. It's worked well and I've been happy with
| it.
| jmknoll wrote:
| I ran a very similar experiment. I don't recall the exact
| dates, but something like 2016 - 2018, and left Wealthfront as
| a result. I was under the threshold that incurs management
| fees, but Wealthfront was outperformed by S&P, at least over my
| time frame.
|
| I never held anything with them during a market downturn, so I
| do wonder what that might look like. Potentially the lower
| returns would be justified by the existence of a hedge or
| holdings in lower-risk assets.
| pepemon wrote:
| Sorry for the possible off-topic, but can anyone explain to me
| how the robo-advising is different/better/worse than constant
| passive investing into popular ETFs, e.g. $SPY, $BND, $VOO, etc.?
| acomms wrote:
| 2 things come to mind: 1. These target the large majority of
| people with no will or interest in researching/picking/managing
| their own ETF investments. 2. Robo advisers re-balance your ETF
| portfolio (in much the way an individual ETF would).
| tanduv wrote:
| Not a comprehensive comparison, but I've been doing monthly
| investments into robo-advisors (Wealthfront and SoFi) as well
| as ETFs (SPY and VOO) for 2 years now. The returns are quite
| similar to ETFs, sometimes higher or lower depending on the
| markets.
| rohitnair wrote:
| Some features that Betterment offers for example
|
| * automatic rebalancing
|
| * tax loss harvesting
|
| * tax co-ordinated investing - looks at both your taxable and
| tax exempt/deffered accounts and directs funds appropriately
| (for example, puts more tax inefficient assets in your tax
| exempt accounts)
|
| You can of course do this on your own as well, so it's up to
| you to decide whether the additional fee is worth it or not.
| Also, not all robo advisors offer the same features - but most
| offer automatic rebalancing at a minimum.
| astrange wrote:
| Automatic rebalancing is not that useful as long as you're
| contributing, because that rebalances on its own.
|
| Betterment's tax loss harvesting is good... unless you're
| expecting your tax rate to go up next year, in which case you
| want to harvest gains... also, it'd be better to not lose
| money in the first place. Since they have alternate
| portfolios like "smart beta" now which try to do that, their
| features conflict with each other.
|
| The main problem is that every robo uses the same Modern
| Portfolio Theory based investing which despite being "modern"
| is from 1960.
| zefhous wrote:
| I mean that's literally where the money ends up anyway. I have
| a small amount in Wealthfront to check it out. With my "10/10"
| risk allocation, my money is all in vanguard funds.
| 45% VTI 20% VEA 19% VWO 14% VIG
| 2% VETB
|
| They do also offer some services such as "tax loss harvesting"
| that you can't really do on your own, but I don't really know
| if it's worth their fee.
|
| Really, I think one of the best investing strategies is to buy
| and hold a variety of Vanguard funds and stop thinking about
| it.
| lotsofpulp wrote:
| You do not even have to hold a variety of Vanguard funds,
| just figure out the year you aim to retire in and buy the
| target date retirement fund.
|
| https://investor.vanguard.com/investment-products/mutual-
| fun...
| brokensegue wrote:
| this is a fine approach. but you can beat it because of
| tax/fee reasons
| Graphguy wrote:
| Target Retirement Funds sometimes hold non-ideal amount of
| cash. Also, make sure you are holding these in a tax-
| advantaged account https://401kspecialistmag.com/target-
| date-fund-providers-inv....
| pinkfairy wrote:
| you can easily do tax loss harvesting on your own
| mgh2 wrote:
| One friend told me it was his way of "outsourcing investment
| research", whether or not that justifies these platform's "low
| fee" and their returns vs. DIY is another issue.
| quickthrowman wrote:
| I wish the US had something better than Plaid to track various
| account balances. That's all I use Wealthfront for, now UBS owns
| all the data and has my logins.
| mbesto wrote:
| Check out https://www.kubera.com/
| Glyptodon wrote:
| Tracking multiple account balances has gotten less easy as more
| accounts offer 2-factor. There really ought to be some kind of
| standard for granting scoped read-only data auth to authorized
| 3rd parties for financial info, but presumably every business
| wants to wall their gardens with delusions about consumers not
| having to work with multiple companies and backwards notions
| that friction keeps people in instead of driving them out.
| prepend wrote:
| I've been using a client based tool (Moneydance) for 10+
| years and some banks did support special accounts that had
| read only access to ofx APIs. It was kind of nice as I didn't
| have to worry about my passwords as much.
|
| It's gotten worse over the years as banks have stopped
| support for open APIs. I guess because of plaid-type
| integrators that make custom interfaces. I'll likely quit my
| bank (usaa) as they got rid of any api access unless you go
| through third parties.
|
| I'm not willing to give my account credentials to a third
| party like plaid where the downside is draining most of my
| liquid assets and investments.
| mindslight wrote:
| It feels like there should be some libre tool that
| automates downloading OFX through the web interfaces and
| keeps up with the breakage, at least for popular banks.
| Integrate with procmail and the like to deal with snake oil
| 2FA, etc.
| dartdartdart wrote:
| Anyone know of any other product offer that will take excess
| after direct deposit and invest it for you?
|
| I've called Fidelity and Betterment and both do not offer an
| automated way like wealthfront does. Really sad to see
| wealthfront being the only player in that space.
|
| Edit: by automated I mean something like "everything over $10k
| after bills, invest". It takes a couple of clicks per month
| manually, but it's been pretty relieving not having to do that
| every month.
| matteotom wrote:
| If you pay for M1 pro ($125/year) you can set a "smart rule" to
| automatically transfer above $x from your spend (checking)
| account to an investment account, and automatically invest it.
| bwbmr wrote:
| Betterment had that until a month ago: "Two-Way Cash Sweep",
| though that swept into their cash reserve account, not the
| investment accounts. They said that less than 1% of users had
| it enabled, and so discontinued it.
| wilg wrote:
| This is what is making me want to switch to Wealthfront or
| something else.
| [deleted]
| liber8 wrote:
| Maybe I'm misunderstanding, but nearly every bank I've ever
| used offers this feature. I currently have auto-transfers and
| auto-investments set up in Fidelity. If you receive a paycheck,
| you can easily set up Fidelity so that it automatically
| transfers $xxxx dollars per month to whatever account you like.
| You can also set up each account to automatically purchase
| $xxxx dollars worth of whatever equity you want.
| dartdartdart wrote:
| Do you bank with fidelity to be able to do this?
| liber8 wrote:
| I have a brokerage account at Fidelity, which I can write
| checks on, but I only use the account for investing. I
| guess theoretically you could use it as a primary bank
| account? I have some auto-transfers into the account each
| month, that automatically get invested, and some auto-
| transfers out to non-Fidelity accounts so I can invest
| proceeds in things Fidelity doesn't offer.
| dartdartdart wrote:
| Yeah you're saying x dollars instead of y dollars over z
| amount. It's a trivial calculation but it's really convenient
| lotsofpulp wrote:
| Is there really that much utility in automating that? It takes
| a few clicks to move money from a checking account in
| Schwab/Fidelity to a target date fund or index ETF.
| all2 wrote:
| I have to _remember_ to do those few clicks, though.
| lotsofpulp wrote:
| Should people not be remembering to login to their accounts
| on a monthly or at least bimonthly basis to save
| statements/verify transactions/check to make sure they are
| not being stolen from?
| all2 wrote:
| I glance at account balances about once a week just out
| of habit. More than that requires brain power that I
| either lack or am too lazy to use unless I plan ahead.
| knappe wrote:
| Vanguard allows you to set up automated withdraws that are
| invested into specific funds, with one caveat:
|
| `It's important to note that you can only automate
| investments into Vanguard mutual funds.`
|
| https://support.vanguard.com/tutorials/automatic-
| investments
| dymk wrote:
| There is. Logging into those accounts is a pain in the ass,
| and requires active effort to remember doing. Automating
| things like bill-pay, deposits, and other "set it and forget
| it" tech is the best thing since sliced bread.
| lotsofpulp wrote:
| >Logging into those accounts is a pain in the ass
|
| Just to be clear, we are talking about clicking on a
| bookmark, letting the password manager fill in the login
| info, and the clicking login or pressing enter?
|
| >requires active effort to remember doing
|
| Checking up on one's assets is something that should be on
| a periodic to do list. We even have devices that can be
| scheduled to alert us when it is time.
| boring_twenties wrote:
| > Just to be clear, we are talking about clicking on a
| bookmark, letting the password manager fill in the login
| info, and the clicking login or pressing enter?
|
| Close, you forgot the part where you need to locate your
| 2FA device, possibly connect it to a charger and wait for
| it to boot if needed, and then of course actually get the
| 2FA code and type it into the website.
|
| edit: Oh, and _I_ forgot the part where if you need to
| boot the device, you probably have to type in the
| password.
| lotsofpulp wrote:
| If I am using a previously used device, I do not get
| asked for 2FA on Schwab or Fidelity.
|
| Also, macOS/iOS automatically fill in SMS 2FA which is
| nice.
| boring_twenties wrote:
| Ah, that's nice, I hate sites that don't do that -- which
| includes the one I am currently forced to use.
| Hilariously, the mobile app allows using the fingerprint
| scanner instead of entering my password -- but still
| requires me to enter the 2FA code every time, which of
| course is on the same device, so it's not doing anything
| other than just wasting my time.
|
| Don't use SMS 2FA, though.
| dymk wrote:
| You can try to argue that this is stuff that people
| _should_ be doing, but it's always nice to build
| technology that acknowledges the tendency for humans to
| avoid doing repetitive, boring, manual work, rather than
| pretend that not be the case.
| kaesar14 wrote:
| There's utility in automating anything you do manually the
| exact same way repeatedly and regularly
| [deleted]
| frankthedog wrote:
| I have an easy setup that's close to what you want. From
| fidelity I got my account and routing number. I took that to my
| payroll provider (ADP) and changed my direct deposit
| instructions to send a fixed amount per paycheck to my checking
| account, and everything over to my fidelity account. I still
| have to login every two weeks and buy shares with whatever was
| just deposited but it's very easy with the app. It looks like
| that could also be automated, but only for automated buys of
| mutual funds. I only use ETFs so haven't played with that
| portion. This setup works really well for me!
| propter_hoc wrote:
| Super interesting. Wealthfront has approximately $27 billion USD
| in AUM according to this article [0].
|
| Meanwhile the leading robo-advisor in Canada, WealthSimple
| recently raised funds at a $5 billion CAD valuation, on a $7.7
| billion USD AUM [1].
|
| I have felt for a while like the robo-advisory market is in
| roadrunner mode - has run past the edge of the cliff but hasn't
| quite yet fallen. Maybe this is the first sign that the party's
| ending.
|
| [0] https://www.roboadvisorpros.com/robo-advisors-with-most-
| aum-...
|
| [1] https://financialpost.com/investing/wealthsimple-
| valuation-s...
| paxys wrote:
| $27B and $8B AUM are both peanuts, and I imagine not a big
| factor in determining valuation for these robo-advisors.
| Corporations are likely more interested in the number of users,
| demographic breakdown (mostly well-off millennials), their
| financial data, credit profiles and upsell opportunities.
| short_sells_poo wrote:
| This. The amount of money they manage is a mouse fart in a
| hurricane when it comes to such low fee business as robo
| advisory. That a robo advisor can get $5bln valuation on
| having $8 bln of assets speaks either to the silliness of the
| valuation or that the value is not in the assets managed
| (likely a combination of both factors).
| myth_drannon wrote:
| Well it's not robo-advisor anymore. It's also crypto, stock
| trading (copying Robinhood) and tax preparation.
| dmix wrote:
| And WealthSimple has a Venmo like Cash app (called Cash).
| They do way more than stocks.
| vmception wrote:
| All about the revenue they make off of that AUM and a multiple
| of that revenue for the purchase price
| anonu wrote:
| Robo-advisory was a dead business 5+ years ago. The game
| quickly had to expand to add services on top of the core robo
| offering. Now the big guys like Vanguard, Fidelity, Schwab all
| have their own robo-flavors. Its become table stakes. In that
| context, this deal makes sense.
|
| UBS has a $2.6tr+ wealth management division - they need the
| sexy fintech frontend.
| laluser wrote:
| It probably depends on what adjacent financial products they
| are selling and how good of a job they are doing at selling
| those to existing customers. Wealthfront is always suggesting
| different financial products, cards, etc. There is little money
| in managing your money since these are mostly served by large
| funds like Vanguard, but there is a lot of money in referrals
| selling you other products. It's possible Wealthsimple is doing
| much better?
| cbhl wrote:
| For what it's worth, Wealthsimple exited the US market last
| year and transferred all their US customers to Betterment.
| They seem to still be adding new products in Canada though
| (like a Venmo-like cash transfer system.)
| jmacd wrote:
| Wealthsimple now has in house advisors who email and call you
| to discuss your account. There is nothing 'robo' about the
| business model anymore and instead they are just focused on
| growing AUM by talking to people and convincing them to move
| more of their savings/TFSA/RRSP over to them.
| blobbers wrote:
| Speaking of TFSA/RRSPs etc. is there a canadian version of
| bogleheads we should know about?
| ryanluker wrote:
| https://canadiancouchpotato.com/ is my go to! They put out
| amazing content over the years and have a great set of
| model portfolios for those just getting into investing.
| jmacd wrote:
| Canadian Couch Potato is the closest.
| iamspoilt wrote:
| We have quite a bit in line with this:
|
| https://www.canadianportfoliomanagerblog.com/blog/
|
| https://community.rationalreminder.ca/
|
| https://www.finiki.org/wiki/Main_Page
|
| https://www.financialwisdomforum.org/forum/index.php
|
| https://canadiancouchpotato.com/
|
| Also, we have Ben Felix's podcasts - Rational Reminder
| whitej125 wrote:
| Wealthfront (and this goes for the rest of Wall Street) are
| analog businesses.
|
| They thrive on mass producing a fixed set of products. Those
| products are ETFs, Mutual Funds... or in Wealthfront's case... a
| rebalancing strategy based on a 1960's white paper called Modern
| Portfolio Theory.
|
| Each of these players spends a ton trying to mass market these
| products. You have financial advisors pitching mutual funds,
| asset managers shilling the virtue of their shiny new ESG ETFs...
| and robo-advisors all promising a set-it-and-forget-it panacea.
| Wealthfront got commoditized. Betterment at first... but then the
| discount brokers came in (Vanguard, Fidelity, etc) and just had a
| much more effective channel (advisors!) to the end investor. If
| you are just selling a singular product and that product is
| successful, you are going to get copied and beaten by competitors
| with better marketing channels.
|
| Wall Street will some day transform from an analog industry of
| mass production to a digital one of mass personalization. The
| building blocks for said transformation are slowly becoming
| ubiquitous (fractional shares support, commission free trading,
| etc). Super excited to watch this happen.
| RandomLensman wrote:
| If I were to guess, I'd say that world will be more expensive
| again for most (or a lot) of individual investors. The costs of
| the whole machinery and the capital necessary to maintain it
| will have to go somewhere.
|
| Mass personalization in investment would only really work if it
| makes sense to truly personalize investments given the huge
| uncertainties involved. But I am sure people will happily sell
| this and find willing buyers.
| tmcw wrote:
| The current norm is that many products are focusing on the
| statistically optimal approach - low fee, market returns - and
| they're competing on price and order execution which benefits
| individual investors.
|
| And the future is about giving investors more ways to damage
| their returns by actively trading and arbitrarily customizing
| their strategy.
| 2bitencryption wrote:
| really interesting takeaways from the Wealthfront landing
| page[0]:
|
| * every example is shown as a smartphone app - not a single
| "desktop-oriented" screenshot to be found. I guess we are
| finished with the days where every service _has_ an app. Now,
| every service _is_ an app.
|
| * In the first example, an investment portfolio is shown where
| roughly 10% of the holdings is in a group called "single stock
| bets." Yikes! Though maybe this a case of "know your audience"?
| maybe they are trying to convert the hordes of GME-pumpers to try
| something a bit less risky?
|
| * lots of emphasis on "emerging markets", "socially responsible
| funds", crypto. I've always heard the best long-term advice is to
| simply throw your money into an ETF tracking the s&p500 or
| nasdaq, but clearly wealthfront is targeting those who want some
| emotional connection to their savings.
|
| all in all, seems like a cool service, especially if it helps
| convince those to begin saving who would otherwise not be saving.
|
| [0] https://www.wealthfront.com/
| PragmaticPulp wrote:
| > * In the first example, an investment portfolio is shown
| where roughly 10% of the holdings is in a group called "single
| stock bets." Yikes! Though maybe this a case of "know your
| audience"? maybe they are trying to convert the hordes of GME-
| pumpers to try something a bit less risky?
|
| Don't read too much into marketing materials.
|
| It's likely that they surveyed a lot of potential customers and
| found a significant number were afraid that Wealthfront
| wouldn't allow them to choose individual stocks. So that
| factoid filtered its way over to the graphics design
| department, who were told to prominently display something
| about how you can still buy individual stocks.
| jonas21 wrote:
| > _In the first example, an investment portfolio is shown where
| roughly 10% of the holdings is in a group called "single stock
| bets." Yikes!_
|
| That's 10% of the entire portfolio spread out over (presumably)
| multiple individual stocks, which seems reasonable to me... is
| it not?
| somethoughts wrote:
| Maybe they were trying to differentiate themselves from the
| offerings of a potential acquirer and prepping themselves for
| aquisition - particularly perhaps once they realized they
| weren't going to be able to beat the legacy banks.
| sethdandridge wrote:
| I don't think having 10% of your equity investments in single
| stock bets is a yikes-worthy level of irresponsibility. It may
| not be the best way to perfectly optimize your long-term
| return, but for the vast majority of people it won't mean the
| difference between retiring comfortably and destitution--
| especially if actively managing a portion of your portfolio
| encourages a higher level of overall saving.
| kylehotchkiss wrote:
| > * every example is shown as a smartphone app - not a single
| "desktop-oriented" screenshot to be found. I guess we are
| finished with the days where every service has an app. Now,
| every service is an app.
|
| Their desktop experience isn't bad though! Other commenters
| have mentioned how garbage Wells Fargo/JP Morgans investment
| dashboards are and wealthfront thankfully takes user experience
| on both platforms seriously
| Glyptodon wrote:
| Wealthfront used to have only a very limited portfolio options
| that used relatively best practices bogglehead-lite-ish, but I
| think ran into users constantly wanting customization,
| regardless of its "optimality".
| blobbers wrote:
| Yes - this is the problem with all "we know best" style
| platforms.
|
| Example: networking gear that supplies a dhcp server. You
| shouldn't have to put in the IP address range. It should just
| be yes or no, so no admin ever needs to know what dhcp even
| really does. It satisfies 80% of customers.
|
| ...but someone wants your own custom DHCP server, with custom
| IPs so that it can support your legacy printers, with
| reserved ranges of static IPs because the ghosted profile
| wants a printer at 172.16.12.2 etc. etc. etc. and that
| customer is willing to buy $1B of equipment, so you do add
| the customization. The slippery slope begins to acquire more
| customers.
| Scoundreller wrote:
| > lots of emphasis on "emerging markets", "socially responsible
| funds", crypto
|
| They love these stocks because they usually have a big short
| interest. The broker can lend them out and keep the profits for
| themself.
|
| Only IKBR does some sharing of securities lending profits.
| bdonlan wrote:
| Fidelity also has a fully-paid securities lending offering,
| and I believe Ally Invest does as well. It's not just IBKR.
| treebornfrog wrote:
| Tim Ferris is laughing on this one. So many intro with
| WealthFront for a long time...
| lzrs wrote:
| I've been researching robo-advisors quite a bit recently. They
| are really interesting and innovative.
|
| I'll preface by saying that I have been talking to a lot of
| financial planners (at top-tier institutions). They basically set
| you up with a good set of ETFs, hedge funds, etc. and rebalance
| occasionally. Sometimes they do tax-loss harvesting. They also
| provide a few other nice little services. But at the end of the
| day, their fees are over 1% unless you have an ultra high net-
| worth.
|
| In comparison, Wealthfront can automate huge strategies for a
| fraction of the cost (0.25%). For example:
|
| - Direct Indexing (invest in an index by buying the stocks
| directly instead of a fund)
|
| - Automatic investing, rebalancing, and tax-loss harvesting
| (including TLHing individual stocks within an index when paired
| with direct indexing)
|
| - Coordinating trades between retirement and taxable accounts for
| optimal tax savings
|
| - Smart beta (a custom weighted indexing algorithm)
|
| Yes, a financial planner can do all of this (although most
| don't). But when they do, they just use automated software to do
| it. It would be impossible to implement these strategies
| manually. So why even go with a financial planner when
| Wealthfront does the same thing, but better/cheaper?
| zie wrote:
| * Edward Jones will do it for you for ~ 2%/yr, which is
| ridiculously high. * Any of the big banks or
| brokerages will do it for less than Edward Jones. *
| Almost any financial advisor will do it for about 1%/yr in
| fees(not ridiculously high, but not remotely cheap) or fee-
| based for a few hundred an hour with a 1st time setup of
| $4-10k, more than $10k is unreasonable. * The robo
| advisors(of which their are dozens with basically identical
| products, generally charge 0.3%/yr, some like Vanguard include
| Financial Advisor services. * At least one firm
| will do it for $200 first year and $100/yr after that,
| regardless of the balance of your accounts, and provide
| financial & tax planning/advice/etc included. They do require a
| little work on your part. I'm actively looking for more
| subscription based advisors like this, please PM me!
| * Bogleheads.org will do it for free as long as you follow
| their template.
| bonestamp2 wrote:
| > At least one firm will do it for $200 first year and
| $100/yr after that
|
| Can you share that one? PM me if preferred. I'm on a similar
| quest and so far I've found pretty much everything else
| you've found. My wife is a high income earner too and she's
| happy with the 1%/yr people that she likes, but I think we
| can get similar results for noticeably less.
|
| Even 0.5% would be reasonable. As you know, from $1m to $2m
| that 1% fee goes from $10k to $20k and they're not doing
| anything more for that extra $10k/yr so the value proposition
| starts to break down for me. $10k in one year isn't a big
| deal, but over 20 years that's $200k, which might affect my
| retirement activities and definitely impacts how much is left
| for my kids (which they're going to really appreciate as life
| is so much more expensive for their generation).
| jcampbell1 wrote:
| It can be hard convincing people that 1% is a big number. I
| assume that you are on average going to see 6-7% return
| after inflation. The 1% represents 15% of the return. So
| you give the tax collector 25% and the money manager
| another 15%. You can defer the taxes but the manager gets
| theirs once a quarter.
|
| When you are in the $1m+ AUM, it is pretty easy to explain.
| You are going to be paying for your kids to go to college
| and one of theirs as well. Make sure you really like them.
| echelon wrote:
| > * Bogleheads.org will do it for free as long as you follow
| their template.
|
| phpBB with a custom "web1" frontend reminiscent of
| Craigslist. That's something I haven't seen in a long time.
|
| My first impression was honestly to trust it more.
|
| Thanks for sharing!
| robotsandcoffee wrote:
| personally my favorite feature is the "autopilot" thing, which
| for example dcan automatically withdraw from my checking
| account and invest when my checking account hits a certain
| threshold. so for example i can just say "if my checking
| account goes above $30k, deposit the rest into some wealthfront
| investment account." i don't think a human financial planner
| can do this easily? just to add to your list.
| neosavvy wrote:
| I agree that robo-advisors are great, but they do leave a lot
| to be desired. I'm actively working on a service that would
| drastically change the way people engage with robo-advisory
| accounts.
|
| I for one prefer to make stock selections on my own, however
| Wealthfront, Betterment, and Personal Capital do not allow me
| to manage my own investments with any of the robo-advisory
| features. There is a huge opportunity in the space.
|
| It would be great to talk to you about it - I'd love to hear
| your thoughts - any way we can connect?
| TuringNYC wrote:
| >> Yes, a financial planner can do all of this (although most
| don't). But when they do, they just use automated software to
| do it. It would be impossible to implement these strategies
| manually. So why even go with a financial planner when
| Wealthfront does the same thing, but better/cheaper?
|
| Thats the 100$B question right? Because fear. Because
| unfamiliarity. Also because 1% seems small, but its really more
| like 14% (if the average return is 7%, you're giving up 1/7 of
| your return!)
| okhobb wrote:
| Not sure I'm following the "more like 14%" ... can you
| explain that calculation?
| rodonn wrote:
| You have $1m and on average it will earn 7% per year. The
| fee is 1% of the $1m ($10k), but it is 14% of your expected
| gains per year (1%/7%). After fees your portfolio will go
| up by 6% per year instead of 7%, which is a substantial
| reduction.
| ryankshaw wrote:
| here's an example: say you have $100k
| invested the 1% fee for that will be $1k the
| earnings will be $7k
|
| so the "1%" fee takes away 14% ($1k is 1/7th, or 14%, of
| $7k) of your earnings.
| whitej125 wrote:
| >> Because fear.
|
| What's funny is... whenever you call an FA (financial
| advisor) in a moment of panic... they answer always is "don't
| act emotionally and stick to the plan". Maybe a real "robo-
| advisor" should just be a chatbot that responds to any
| message it gets with "HODL".
|
| >> Because unfamiliarity.
|
| This one is going to be interesting to watch evolve and I see
| it becoming less of an edge for financial advisors. More and
| more, we are seeing retail investors gain familiarity (not
| saying knowledge... but at least familiarity) with financial
| markets through blogs, social media, etc. I think we are
| moving to a world of more self-directed investors than
| advised investors.
|
| Some interesting articles to that effect:
|
| https://www.wsj.com/articles/rich-millennials-to-
| financial-a...
|
| https://www.wsj.com/articles/fidelity-once-stodgy-and-
| adrift...
|
| https://www.m1finance.com/blog/the-rise-of-financial-
| influen...
| deathanatos wrote:
| > _What 's funny is... whenever you call an FA (financial
| advisor) in a moment of panic... they answer always is
| "don't act emotionally and stick to the plan". Maybe a real
| "robo-advisor" should just be a chatbot that responds to
| any message it gets with "HODL"._
|
| My robo-advisor did, during the giant tumble the markets
| took during the beginning of this pandemic, put up a
| message on the site & send a pro-active communication
| saying, essentially, to HODL. (In more eloquent terms, of
| course.) I presume a human had a hand in it, ofc., as they
| likely understood the fear most people would feel looking
| at the graph.
|
| (My mistake, really, was not buying more at the bottom.)
| sanjiwatsuki wrote:
| I do recall that one of the features that Wealthfront had
| was to design their UX in a way that discouraged behaviors
| like frequently checking the valuations, making it annoying
| to make emotional transactions, etc, etc. Rather than
| having a human tell you to be calm, they tried to mediate
| behavior through UX patterns.
| bonestamp2 wrote:
| That's interesting. I did notice that the Wealthfront UX
| was really well done.
|
| For example, during the onboarding they direct you to set
| up recurring investments and they show you in real time
| what that small investment might become by retirement
| age. That simple mechanic, which nobody else seems to do
| in that way during onboarding, makes it really obvious
| that you need to set that recurring deposit to be as high
| as you can possibly afford.
| hrez wrote:
| > I've been researching robo-advisors quite a bit recently.
|
| "The Robo Report" [1] has detailed quarterly robo reports on
| performance, features, comparisons etc
|
| [1] https://www.backendbenchmarking.com/
| moneywoes wrote:
| Why not use a Vanguard target date fund
| adrr wrote:
| Does Wealthfront actually buy individual stocks? Most robo-
| advisors buy ETFs. So you're paying double management fees. I'm
| not aware of any robo-advisors that actually buy individual
| stocks.
| bt3 wrote:
| Yes. Once you cross a certain threshold (I think it's $100k
| portfolio), they'll switch you to "Direct Indexing", which
| automates individual stock purchases.
| borski wrote:
| Once you cross a threshold of investable assets at which it
| makes sense (usually a few hundred thousand), most robots
| have an active indexing strategy in addition to or instead of
| ETFs.
| mushufasa wrote:
| Many people who start off with Robos like Wealthfront actually
| leave once their net worth rises and pay more for human
| advisors.
|
| If you need to invest a small/decent amount of money into
| stocks, Robos work wonderfully. It's a mass production angle --
| good quality service at lower cost to many people; the Ford
| Model T of investing. Early robot just had a couple of
| investment options, and now there are more options but the same
| concept of limited choice at scale (Mustangs, Minvans, Trucks
| in my example)
|
| Once you have estate planning and complicated tax issues, human
| advisors provide a lot of guidance to people that is hyper
| specific to you and your location / niche, which Robos just
| don't cover. Wealthfront, for example, won't arbitrate a
| dispute between beneficiaries of a family trust.
|
| I think lawyers are a good comparison here. If you need some
| standard cookie-cutter incorporation docs, there's a bunch of
| websites where you can get some core documents for free or a
| few hundred dollars. But if you're afraid of making the wrong
| choice, or if you're in a situation that goes beyond the common
| scenarios (like M&A), then you hire a lawyer to provide you
| personalized advice.
| [deleted]
| sgustard wrote:
| You can pay for both human advisors and robo-investing. A
| human advisor will charge 1% of assets to manage your money
| for you, and the results may not differ much from what the
| robot picks at much lower cost. I'm happy with the robot's
| asset allocation and I pay an expert for taxes, trusts, and
| so on.
| ivalm wrote:
| > Once you have estate planning and complicated tax issues,
| human advisors provide a lot of guidance to people that is
| hyper specific to you and your location / niche, which Robos
| just don't cover. Wealthfront, for example, won't arbitrate a
| dispute between beneficiaries of a family trust.
|
| I agree fully that estate planning/making a trust is
| something most people would benefit from a human advisor, but
| this is something you can target with an estate lawyer. I
| don't think this is something you would need advice on
| regular basis.
|
| For taxes, I am guessing vast majority of people, even
| wealthy people, never need human advice nowadays. Anything
| that is just combination of W2+1099DIV+1099B+1099INT+1099NEC
| is handled well with robo tools. Tax loss harvesting is
| pretty simple (even without robo advising!) as long as you
| know wash sale rules and distinction between long/short term
| capital gains.
| lzrs wrote:
| Yes, completely agree. That happens when all of the other
| estate planning costs begin to vastly outweigh the cost of
| investment advising. I'm no expert, but I am under the
| impression that although these automated strategies are a
| smaller part of the whole picture for high net-worth
| individuals, the strategies are still the same.
|
| I'm interested to see if UBS can add value in those ways you
| mentioned, while still using sophisticated automated
| strategies for cost savings purposes.
|
| Also note that Vanguard, JPM, Schwab, Fidelity etc. are
| getting in the robo-advising/direct indexing game.
| jcfrei wrote:
| I doubt they'll add much value - they don't want to
| cannibalize their core business even more. They'll probably
| just add a button that says "talk to a UBS wealth manager"
| when your portfolio value crosses a certain threshold.
| borski wrote:
| The one exception is alternative investments like real
| estate and private equity. Once you are HNW or at least
| high enough to have enough investable assets that you
| qualify, PE can be an attractive investment class that
| Wealthfront won't touch.
|
| Also, human advisors can manage, or at least access,
| investments across brokerages; that is, you don't have to
| worry as much about wash sale rules and can do tax loss
| harvesting because they can see your sales elsewhere. I
| have to have TLH turned off on Wealthfront because it has
| no way of knowing about what things I've sold elsewhere.
|
| Not financial advice, YMMV, etc.
| maxclark wrote:
| I started with and was a Wealthfront customer for many years.
| I'm appreciative and credit them with starting my education and
| understanding on investing.
|
| What caused me to leave?
|
| - They aren't global portfolio aware. Bonds belong in tax
| advantaged accounts, then taxable. If you've maxed out your
| 401k/IRAs in Bonds that $ as an absolute percentage should be
| accounted for in your taxable portfolio construction.
|
| - They don't let you opt out of asset classes. Aka I don't want
| additional REITs because I have RE exposure already.
|
| - They overly hype tax loss harvesting. It's good to have, but
| a byproduct of portfolio management not the goal.
|
| - They launched and pushed risky products as a way to increase
| their fees.
|
| Once you understand what's going on under the hood this isn't
| complicated to manage yourself with a few ETFs/MFs.
|
| (The direct indexing is awesome and would love to have that
| back)
| PascLeRasc wrote:
| You can opt out of asset classes now. I moved out of
| Wealthfront to save money and try to DIY but so far I've had
| a really hard time doing it in terms of finding time to place
| the buy order during the workday and doing tax loss
| harvesting without wash sales.
| sharx wrote:
| I've heard that when you leave direct indexing you end up
| with all the individual stocks in your new portfolio, or you
| have to sell them and eat the capital gains tax. Was that
| your experience?
| clamstar wrote:
| You end up with a bunch of individual stocks in your new
| brokerage account. It's a pain. I separate account at
| etrade specifically for my "WF500" shares, and still just
| treat them as a single organism.
| rjj wrote:
| Why do bonds being in tax advantages accounts? My gut would
| suspect the opposite, since on average stocks will have
| higher return so you'll want them getting the tax break.
| clamstar wrote:
| Taxes on dividends.
| itake wrote:
| bond dividends/interest are taxed like regular income.
| stocks (capital gains) are taxed at a lower rate.
| colordrops wrote:
| Does Fidelity have robo-advising? Because all the big companies
| I've worked at use them for retirement funds, and I've found
| most of the management is heavily manual at Fidelity.
| throwawaygh wrote:
| https://www.fidelity.com/digital-investing-and-
| advice/simple...
| dnadler wrote:
| They do, it's called Fidelity Go. They have a similar product
| for advisors called AMP. I actually worked on these products
| a while ago, they're all very similar when it comes down to
| it.
| pinkfairy wrote:
| This reads like an ad?
|
| Curious why you would need to coordinate trades been taxable
| and retirement accounts?
|
| Why would you want smart beta (that's active management)?
|
| Their direct indexing portfolio also includes a whole bunch of
| their own in-house risk parity garbage products that carry high
| fees
|
| The biggest question to me, you can trade ETFs for free now,
| why do you need wealthfront at all?
| xxpor wrote:
| >Curious why you would need to coordinate trades been taxable
| and retirement accounts?
|
| If you treat your retirement and taxable accounts as one big
| pot of money, you want to place assets to take the most
| advantage of the retirement account. For example, they
| mentioned bonds. Since yield on bonds is taxable at income
| tax levels every year, you want to prefer holding them in the
| tax exempt account.
|
| Another reason is because of tax loss harvesting. To make
| that work, you have to avoid wash sales. The wash sale rule
| applies to you and every account you own, taxable,
| retirement, across brokers, etc. So to make TLH work, the
| broker needs to have a complete view.
|
| >The biggest question to me, you can trade ETFs for free now,
| why do you need wealthfront at all?
|
| For me, I'm on the west coast, so the market is open from
| 6:30 AM to 1 PM. I can't really monitor it nearly as closely
| as I'd really prefer. Looking at my betterment history, last
| year they automated 275 transactions for me. I can really
| only be bothered to look at the account once a month or so.
| Do the efficiency gains from a lower drift get me 0.25%
| additional value? Hard to say, but probably not. However, TLH
| absolutely has. I wouldn't trust myself to track that
| properly at all.
| astrange wrote:
| > Another reason is because of tax loss harvesting. To make
| that work, you have to avoid wash sales. The wash sale rule
| applies to you and every account you own, taxable,
| retirement, across brokers, etc. So to make TLH work, the
| broker needs to have a complete view.
|
| It doesn't really. They like saying that because it shows
| off their product, but the IRS doesn't know what's in your
| retirement account and probably no-one has ever gotten in
| trouble for this. There are robos that don't coordinate it,
| even.
| matteotom wrote:
| I know someone who's been doing wealth management for like 20
| or 30 years now. Based on what they've told me, I'd separate
| clients roughly into 3 categories:
|
| 1. people who don't want to think about it - they pay for
| everything to be taken care of properly
|
| 2. people who want to be wined and dined - they end up paying
| to be taken out to dinner a few times a year and hear about
| what the firm is doing to survive bear markets and how they're
| taking advantage of bull markets
|
| 3. people who think they're smarter than everyone and want to
| direct everything - these people are probably moving to more
| self serve options, but plenty still want to tell a human what
| trades to make
|
| Also at a certain net worth, tax and estate planning is a huge
| part of the work.
| onphonenow wrote:
| The wined and dined people also often really don't want to
| deal with a website and they want someone to call who can
| "get things done" if needed.
|
| So for wealthfront and friends, let's say a family member is
| closing on a property purchase. You said you'd put in $500K.
| Closing comes and you try to wire the money over. But wait,
| it doesn't work.
|
| 1) First you have to sell investments 2) Trades have to
| SETTLE (T+2 or more)! 3) Then and only then can you initiate
| an ACH transfer. 4) It can only go to your own account in
| some cases (T+1/T+2) 5) Then you have to go to you bank and
| get a wire out (retail banks often have tight cutoffs or end
| up delayed if going online while they "approve" this). 6)
| This all can be stressful on closing day (agents calling,
| escrow calling, bank calling, your relative calling). Now you
| are not days but a week late.
|
| vs
|
| Talking with someone. They enable margin account if you don't
| have one, you wire same day, done or you can give your guys
| name to everyone to help coordinate if needed if it will be a
| bit late.
| borski wrote:
| This is honestly a huge deal - when I make an angel
| investment, I send a text and/or wire info via the Merrill
| Lynch app, and I know it will be taken care of (by the same
| people every time) same day or next day, depending on when
| I send it.
|
| That plus introductions and referrals to tax accountants,
| estate attorneys, etc., and access to investment vehicles I
| otherwise wouldn't get (easily), definitely makes the 0.7%
| fee worth it for me.
|
| [quick edit] Honestly, as someone who comes from an
| impoverished background, they also act largely as
| "financial therapists." That is, I don't make emotional
| decisions about money, but that doesn't mean I don't have
| tons of anxiety when I spend money on something large; they
| generate a wealth plan, allow me to see how my assets will
| change, allow me to (based on models) see if I'm
| overfunded, underfunded, etc., and I don't have to do a
| thing other than send a text. That is insanely helpful to
| me, personally.
| dnadler wrote:
| This is very interesting to me. I've been working on a
| retirement calculator in my free time as a hobby project
| for a while [1], but it never really occurred to me that
| there is real value in allowing people to do the 'what-
| if' analysis more easily. It seems obvious now...
|
| Could you see yourself using something like this if there
| was an easy way to compare different scenarios?
|
| [1] https://lunchmodel.com/lmrc/scenario
| kmonsen wrote:
| But why go with wealthfront when you can buy a target date fund
| from vanguard? It gets you most of what you really need?
| wayne wrote:
| Even a few months ago, I was recommending the same to
| friends. But late in 2021, Vanguard unexpectedly hit all
| their Target Date funds with large tax bills:
| https://www.bogleheads.org/forum/viewtopic.php?f=10&t=366566
|
| The speculation online is that it's because they lowered the
| minimum for their institution class funds, many large
| employer retirement funds sold their holdings of the non-
| institution funds, leaving everyone left with large capital
| gains and hence large tax bills unless you held it in a
| 401k/IRA.
|
| I find Wealthfront to be overkill, but this is precisely the
| kind of thing they'd save you from.
| jbullock35 wrote:
| Useful Wall Street Journal article on this point:
| https://archive.is/3i800.
| onphonenow wrote:
| I still don't understand why there wasn't a way to do an
| exchange on this conversion that avoided this! I mean,
| contribute the holdings of fund A to fund B etc.
| kmonsen wrote:
| OK I see they do this every 5 years so it should not be
| that extreme (I only hold it in various tax sheltered
| accounts now).
|
| One step further is to hold the index funds and bonds
| yourself, that is not exactly rocket science.
|
| I would also say that if you have 6 million USD that is a
| bit different than most wealthfront customers I think.
| NavinF wrote:
| If you just buy and hold a target date fund, you miss out on
| loss harvesting. A free loan on taxes owed can be turned into
| free money.
| xur17 wrote:
| While true, note that the effects of tax loss harvesting
| are really only significant for a few years after acquiring
| the asset (since stocks tend to go up over time), but you
| will pay the Wealthfront fee for the rest of your life
| (especially since they do direct indexing, which makes
| switching away complicated).
|
| And fwiw, tax loss harvesting sounds complicated, but it
| really isn't that hard to do. If I notice stocks have gone
| down a lot recently, I'll hop into Vanguard, and swap
| anything that is underwater with another similar, but not
| identical fund. I have one for international and one for US
| stocks. Took me a few hours to get a system down, and now
| it's a few minutes to do the harvest once every few years.
| rodonn wrote:
| This is very true when you only have a handful of assets
| (e.g 6 ETFs), but the benefits stick around for longer
| when you do direct investing in stocks (e.g. rather than
| buying S&P 500 directly, you buy each of the 500 stocks
| that make up the index). Then in a given year there will
| almost certainly be some stocks will losses even if the
| index as a whole goes up.
| extesy wrote:
| > the effects of tax loss harvesting are really only
| significant for a few years after acquiring the asset
| (since stocks tend to go up over time)
|
| This is true only if you invest once in your life and
| then hold those assets forever. But if you invest every
| quarter then you can do TLH on those new lots
| individually. And since those new lots will keep coming,
| your TLH will always have something to work with.
| xxpor wrote:
| You can't split the assets in the target date fund to be tax
| efficient.
| paxys wrote:
| Thing is, all of these are simple enough that anyone with a
| tiny bit of financial knowledge or Googling can do it for
| themselves. Sure a lot of people don't bother, but when your
| investment size starts going up the 0.25%-1% commission is a
| LOT of money.
|
| Study after study has shown that investing in a broad market
| fund plus occasional (once a quarter) rebalancing is going to
| beat managed investing on average. So where do these products
| fit in really?
| lzrs wrote:
| Well, actually a lot of these strategies are really hard to
| implement on your own. For example, in direct indexing you
| are buying hundreds of stocks in an attempt to replicate an
| indexing. You are also constantly rebalancing and tax-loss
| harvesting.
|
| You could definitely just buy an index fund, but it's not
| exactly comparable.
| lazide wrote:
| The folks using WealthFront don't have enough money invested
| that 1% is a lot of money, and they generally very much
| suffer from lack of time or knowledge on how to invest
| properly (or willingness/ability to sit down, learn, and DIY
| properly either).
| shoyer wrote:
| My experience was that robo-investors are great until you need
| something special. Then they can become rather painful.
|
| Exmaple: I got divorced last year. Betterment took weeks of
| time and many phones calls until they were able to figure out a
| way to divide our assets evenly, without a large difference in
| cost basis. Their automatic algorithm for dividing accounts
| just didn't know how to handle it.
|
| If UBS figures out how to offer a higher level of service on
| top of robo-advising, that could be a real win.
| troydavis wrote:
| Wealthfront's announcement:
| https://blog.wealthfront.com/wealthfront-has-agreed-to-be-ac...
| rkalla wrote:
| When I think of what a FinTech darling Wealthfront was when it
| came out, all I can see this is as a colossal flop.
|
| For what it's worth...
|
| About a year ago I opened a robo-advisor account at SoFi and
| another at Wealthfront and pitted them against each other with
| high-risk/default settings and a weekly deposit.
|
| The SoFi one has been outperforming the Wealthfront one all year
| long (by 1-2%; nothing life changing) which surprised me but it
| also made me feel that all the magic AI/ML under the covers that
| WF promoted didn't exist and no one was managing anything.
| vailripper wrote:
| Has it continued to outperform Wealthfront during the past
| couple of weeks, where the markets have been trending more
| downward? Curious if SoFi has a higher-risk 'high-risk' setting
| than Wealthfront, in which case you might expect them to take
| more of a hit when the markets go down.
| astrange wrote:
| Stock returns over a single year are meaningless and not what
| they optimize for. Their "optimization" isn't perfect (MPT has
| some silly assumptions) but it's made for 30 years from now.
| smohnot wrote:
| 470k accounts and $27B AUM, ~$60k per account.
|
| @ 25bps that would be ~$70M revenue but there is some discounting
| so it is probably closer to $60M
|
| 2021 was a good year for the market, a great time to be acquired.
|
| They raised in 2014 @ $750M then 2017 @$500M
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