FPPad Bits and Bytes for October 31

What a wild week! Schwab announces its “free” (except for ETFs expense ratios) online automated investment solution, and then Wealthfront and Personal Capital proceed to secure a combined $114 million in additional venture capital. While I originally titled this update as It’s now a robo-eat-robo world, I’m sticking with the conventional FPPad Bits and Bytes update.

FPPad Quick Hits

  • Schwab introduces its ultra-low cost, dare I say “free,” Schwab Intelligent Portfolios online platform; investors only pay underlying ETF expenses
  • Wealthfront raises $64 million for a total of $129 million in venture capital, AUM is now $1.4 billion
  • Personal Capital raises $50 million of its own for a total of $104.3 million in venture capital
  • FINRA says it’s hiring a “handful” of people with cybersecurity expertise, so hopefully the new auditors will know a thing or two about holes in broker-dealer security

Schwab to offer free ‘robo-advice’ from Reuters

[Let me pose a few questions: Will Schwab’s ultra low cost investment service lure customers away from startups like Wealthfront, Betterment, Future Advisor, and others who charge anywhere between 15 and 40 basis points for automated investment management? Will investors pay a premium for modern web design and mobile app access to their investment portfolios? Schwab’s Intelligent Portfolio website looks really bad compared with ones published by the startups. It’s Hal, only with a blue eye instead of red. Because the color blue conveys trust, correct? Then, Is Schwab’s brand recognition significant enough to influence the “buying” decision of investors shopping around for low-cost investment services?] Charles Schwab Corp confirmed on Monday that it will introduce free automated investment plans picked by computer algorithms in the first quarter of 2015.

Wealthfront CEO Adam Nash explains his plans for that $100 million pile of cash from Pando.com

[Wealthfront has now raised $129 million in venture capital with its latest round of $64 million. Here are some more questions: Does anyone outside of Wealthfront know what they’re going to do with $100 million? From reading most coverage, I think the answer is no. Look, VC investors certainly want an exit from Wealthfront (and from all of their investments), and despite what Adam Nash says in this article about independence, Nash should expect some pressure from his investors should the company fail to meet expectations over the next several years. Nash cites independence from Wall Street. Ok. But Wall Street doesn’t care about Wealthfront because Wealthfront isn’t stealing any of Wall Street’s customers (yet). Wealthfront is till squarely focused on the Silicon Valley-startup-entrepreneuer-Millennial population and has yet to strongly deviate from that target market. At least, that is, until that market is saturated and loses momentum.] Wealthfront is rolling in cash. The company announced this morning that it raised $64 million in a Series D round led by Spark Capital. The funding follows closely on the heels of the company’s $35 million Series C in April of this year, a pool of capital that it has yet to even touch, and means that it now has more than $100 million in cash in its war chest.

Personal Capital Adds $50 Million As Digital Financial Management Bulks Up from TechCrunch.com

[Personal Capital is NOT a low-cost online investment service. It’s a startup that closely resembles the business model of a traditional RIA, but one that has built an impressive array of technology tools. Chief executive Bill Harris keeps stressing that the company is delivering digital wealth management, and the company does employ somewhere around 100 human advisers in Denver and Redwood City. Chances are, Personal Capital is not very different from most large RIAs managing around $1 billion, but they’re able to attract outside capital to support growth. One difference is that their technology is all built in-house, while I suspect the majority of your technology comes from your custodian or third-party software providers.] In the latest news, Personal Capital, a provider of electronically enabled wealth management services, said it has raised $50 million in a new round of financing.

Wall Street watchdog to bolster reviews of brokerage cyber security from Reuters

[Wait, so the people FINRA is sending TODAY to audit the security of broker-dealer firms AREN’T experts in technology? Better late than never to announce they’re going to hire a “handful” of examiners with technology expertise to look for security holes. But expect the SEC to do the same, as your exams are going to dive much deeper into the software, hardware, and security policies in place at your firm.] Wall Street’s industry funded watchdog plans to intensify its scrutiny of cyber security practices at brokerage firms in 2015 and is hiring technology savvy examiners to help boost its efforts, an official said on Wednesday.


2 Responses to “FPPad Bits and Bytes for October 31”

  1. Jack November 2, 2014 12:48 pm

    Bill, thanks for the update. Curious. Is this site a hobby or your main income source? You have existing clients money you manage now right?

    • Bill Winterberg November 2, 2014 12:57 pm


      Thanks for your question. I used to run an RIA when I lived in Oregon from 2006-2009, but I shut that down to do full-time technology consulting for advisors and vendors.

      This site does generate income that supports the free content I make available to advisors, and I also earn revenue by speaking, consulting, and writing in the industry. More information on my services is at http://www.fppad.com/services