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UBS Acquires Wealthfront for $1.4B

reuters.com

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Re: UBS Acquires Wealthfront for $1.4B

#131

Post by lzrs »

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?

Re: UBS Acquires Wealthfront for $1.4B

#132

Post by akashshah87 »

pssdbt wrote: post #120
subsubzero wrote: post #89

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 wealthfro…

Interesting, I started in 2017 and am up 40.58% all time today.

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%

Re: UBS Acquires Wealthfront for $1.4B

#133

Post by endisneigh »

hedora wrote: post #93
endisneigh wrote: post #58

Earlier quoted context omitted.

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.

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.

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

Re: UBS Acquires Wealthfront for $1.4B

#134

Post by Beaver117 »

akashshah87 wrote: post #132
pssdbt wrote: post #120

Earlier quoted context omitted.

Interesting, I started in 2017 and am up 40.58% all time today.

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%

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

Re: UBS Acquires Wealthfront for $1.4B

#135

Post by short_sells_poo »

paxys wrote: post #126
propter_hoc wrote: post #15

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 tha…

$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.

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).

Re: UBS Acquires Wealthfront for $1.4B

#136

Post by robotsandcoffee »

lzrs wrote: post #131

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 d…

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.

Re: UBS Acquires Wealthfront for $1.4B

#137

Post by TuringNYC »

lzrs wrote: post #131

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 d…

>> 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!)

Re: UBS Acquires Wealthfront for $1.4B

#138

Post by dan_quixote »

subsubzero wrote: post #89

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 wealthfro…

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/

Re: UBS Acquires Wealthfront for $1.4B

#139

Post by mushufasa »

lzrs wrote: post #131

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 d…

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.

Re: UBS Acquires Wealthfront for $1.4B

#140

Post by RandomLensman »

whitej125 wrote: post #130

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 ma…

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.

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