[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 ___________________________________________________________________ (page generated 2022-01-26 23:00 UTC)