Monday, April 28, 2014

Investment Management 3.0


The remarkable growth in assets managed by "new model" low cost online investment management firms, such as Wealthfront and FutureAdvisor, is a well-publicized major trend.  Please see these recent articles:  The Rise of the Robo AdvisorsFinancial Advice ..., and ... New Funding. 

An investment manager who doubted the staying power of the "new model" firms is likely to have his or her doubts reduced or removed upon hearing this news:  Vanguard expands online advice.

Wealthfront in particular looks worth closer looks.  The emphasis on low costs ("extremely low costs," per Wealthfront's website), tempered with an eye to ETF tracking error and liquidity, is on the money.

And Wealthfront's tax-loss harvesting is innovative by being available to smaller accounts that typically have not been able to benefit from similar services.  This writer's prediction is that the innovation will soon be available more broadly due to competitive pressures.  (Another prediction:  broad availability of online tax-lost harvesting for most account sizes, large or small, will eventually lead to a change in the tax code to stem the government's tax revenue decline.)

Another "plus factor" to Wealthfront:  the firm's FAQs.  Acknowledged that a company's FAQs often wouldn't seem to matter much.  However, in this writer's view Wealthfront's FAQs are in the nature of small things that can really matter, and a harbinger of good things.  The FAQs are remarkably informative and well-organized.  They provide good insight into Wealthfront management's approach to investing and reflect reassuring attention to detail.   

      

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