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UBS Acquires Wealthfront for $1.4B

reuters.com

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Re: UBS Acquires Wealthfront for $1.4B

#141

Post by xur17 »

prepend wrote: post #45
blobbers wrote: post #2

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.

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 ex…

Agreed. To me target date retirement funds honestly make more sense for most people.

Re: UBS Acquires Wealthfront for $1.4B

#142

Post by whitej125 »

TuringNYC wrote: post #137
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% (…

>> 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...

Re: UBS Acquires Wealthfront for $1.4B

#143

Post by paxys »

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…

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?

Re: UBS Acquires Wealthfront for $1.4B

#144

Post by astura »

endisneigh wrote: post #34
astura wrote: post #22

Earlier quoted context omitted.

>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.

I don’t disagree but my point is that an uninformed investor would be better off financially with a straight index.

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.

Re: UBS Acquires Wealthfront for $1.4B

#145

Post by tmcw »

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…

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.

Re: UBS Acquires Wealthfront for $1.4B

#146

Post by Graphguy »

lotsofpulp wrote: post #84
zefhous wrote: post #79

Earlier quoted context omitted.

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…

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...

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....

Re: UBS Acquires Wealthfront for $1.4B

#147

Post by lzrs »

mushufasa wrote: post #139
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…

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.

Re: UBS Acquires Wealthfront for $1.4B

#148

Post by sanjiwatsuki »

whitej125 wrote: post #142
TuringNYC wrote: post #137

Earlier 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% (…

>> 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…

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.

Re: UBS Acquires Wealthfront for $1.4B

#149

Post by frankthedog »

dartdartdart wrote: post #12

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 pre…

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!

Re: UBS Acquires Wealthfront for $1.4B

#150

Post by lzrs »

paxys wrote: post #143
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…

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…

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.

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