Earlier quoted context omitted.
Did anyone get any real beta out of it for a sustainable period?
beta is correlation to the market (usually refers to SPY correlation). Not sure what you're saying.
sorry I meant alpha. oops
UBS Acquires Wealthfront for $1.4B
201–210 of 330 posts
Re: UBS Acquires Wealthfront for $1.4B
#202I'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…
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…
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?
Re: UBS Acquires Wealthfront for $1.4B
#203Sorry 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.?
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…
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.
Re: UBS Acquires Wealthfront for $1.4B
#204Earlier quoted context omitted.
>> Yes, a financial planner can do all of this (although most don't). But when they do, they just use automated software to do it. It would be impossible to implement these strategies manually. So why even go with a financial planner when Wealthfront does the same thing, but better/cheaper? Thats the 100$B question right? Because fear. Because unfamiliarity. Also because 1% seems small, but its really more like 14% (…
Not sure I'm following the "more like 14%" ... can you explain that calculation?
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.
Re: UBS Acquires Wealthfront for $1.4B
#205Earlier quoted context omitted.
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.
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…
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.
Re: UBS Acquires Wealthfront for $1.4B
#206Earlier quoted context omitted.
>> Yes, a financial planner can do all of this (although most don't). But when they do, they just use automated software to do it. It would be impossible to implement these strategies manually. So why even go with a financial planner when Wealthfront does the same thing, but better/cheaper? Thats the 100$B question right? Because fear. Because unfamiliarity. Also because 1% seems small, but its really more like 14% (…
Not sure I'm following the "more like 14%" ... can you explain that calculation?
here's an example:
say you have $100k invested
the 1% fee for that will be $1k
the earnings will be $7k
Re: UBS Acquires Wealthfront for $1.4B
#207When 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…
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.
Re: UBS Acquires Wealthfront for $1.4B
#208Earlier quoted context omitted.
> 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.
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.
Why does Vanguard sell you ETFs instead of keeping them for themselves?
Re: UBS Acquires Wealthfront for $1.4B
#209I'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"…
> 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…
> 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"?
Re: UBS Acquires Wealthfront for $1.4B
#210I'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…
> I've been researching robo-advisors quite a bit recently.
"The Robo Report" [1] has detailed quarterly robo reports on performance, features, comparisons etc