Archive | General RSS feed for this section

July 20, 2017 Update

July 20: 2 minute read

I haven’t published new content to FPPad since March 2017, so here’s some quick insight on things behind the scenes.

I’ve published several videos to the FPPad YouTube channel, including longer discussions with RIA in a Box and Snappy Kraken that include product walkthroughs. Subscribe to the FPPad YouTube channel AND click the bell icon to receive notifications when new videos are posted. Arguably that’s the easiest way to see what gets published, as I don’t always follow up with an update via email or even a new post to the FPPad blog.

Generally, I’ve been posting regularly to Twitter, including links to insightful interviews, previews of the #FuseUtah hackathon coming in September, and a new savings account startup that might, just might, pay 2-4% interest on your cash (pending a planned release in October, which you should know, is more like a guideline than a definitive date).

But in case you’re wondering, the answer is yes, I’m still focused on covering companies, trends, and issues in financial adviser technology, but the volume and frequency of my content has trailed off over the last six months.

Here are three main reasons why.

First, I took on several retainer engagements in H1 2017 to create marketing materials for social media channels for several companies including Morningstar and Redtail Technologies. Here’s some Morningstar promotional material we produced and here’s what we’re working on with Redtail: http://www.wheredoyouredtail.com/ (and when I write we, I mean Steve Biermann and I). As I created more video content personally and for FPPad (I have something like 400 videos on that channel), I discovered that 1) I liked the creative process, and 2) I’m actually pretty good at creating compelling videos, and 3) more companies want to increase their footprint in the online and social content marketplace to promote their brand and communicate their story.

Second, I took all of June and half of July off to go on a 32-day trip to Yellowstone and back with my family, and I decided to make a daily vlog of the trip. In my 39 years I’ve never been to that part of the country, and I’m so blessed to have the opportunity to take it all in for a month and at the same time capture each day’s moments in a permanent family movie.

And finally, I’ve taken advantage of the slow summer to figure out more scalable ways to continue to add value to the thousands of you who have subscribed to FPPad without overwhelming too many of you with a barrage of disparate pseudo-content updates. I don’t quite have the answer of what format(s) that will take in the near future, but I do know that I’m not giving up on fintech or the importance of the financial advice you deliver to clients.

There are still millions of Americans who aren’t getting the financial advice from which they can benefit tremendously, and I firmly believe that the application of financial technology can increase access to financial advice at a price most Americans can afford.

So if you have comments or suggestions on what would benefit you as a subscriber, or if you just want to offer words of support, hit me up on Twitter or email me at bill@fppad.com

Thank you!

Rapid fire fintech updates from Twitter Moments

Twitter recently added the ability for all users to create their custom “Moments” feed. I took the opportunity to test Twitter Moments to create a list of rapid-fire fintech updates from many of the top vendors and service providers in the industry.

Take a look at the Moment below and let me know what you think!

Will 2016 bring a “run on the robos?”

How well are the online investment services prepared for a run on the bank type scenario?

How well are the online investment services prepared for a run on the bank type scenario?

Edit January 6, 2016: Added details that Personal Capital Advisors uses the custody services of Pershing Advisor Solutions LLC. Removed this tweet from a user of Personal Capital’s free dashboard, replaced with the Wealthfront tweet seen below.

I’m posting this today, as I’m genuinely concerned about what will happen when online investment services get flooded with redemption/account close requests.

“You STINK”

For example, take this tweet (note to readers in the future: if the embedded tweets below get deleted, I captured screenshots that I can post for posterity):

I stumbled across this tweet, as this person is upset about their portfolio performance.

So this got me thinking:

What happens when online investment services get flooded with redemption requests and account closures?

Run on the Robos

If an online investment service isn’t responsive to requests and complaints in a public forum (Twitter), how well will they respond once they are deluged with irate customers who are fed up and want out quickly?

“Sorry, we have a big backlog right now, but no worries, your money is still safe?”

¯_(ツ)_/¯

I don’t ever want to see businesses fail. I don’t ever want to see investors get into difficult situations regarding their investments.

But I fear that if a trickle of dissatisfaction with online investment services quickly becomes a flood, online services will get crushed.

Not picking on Personal Capital

Before you go, don’t assume that I’m picking on Personal Capital.

Yes, tweets above that are related to their company trigged my question of what happens when account closure rates skyrocket, but Personal Capital uses the custody services of Pershing Advisor Solutions LLC (it’s on page 5 of their Form ADV Part 2A Appendix 1).

Look, Pershing is a very large financial institution with nearly $1.5 trillion in global assets under administration and 75 years of experience.

200 account closures a day probably doesn’t make them sweat. 1,000 a week? That might be an average week. ACH, DTC, ACAT, they don’t bat an eye.

But for the startups that manage their own proprietary systems on top of Apex Clearing? Have they been tested?

I suppose I can contact them and ask, but what answer do you think I’m going to receive?

“Oh, Bill, thank you for bringing this to our attention, and as a result we found bottlenecks in our processes and have improved our ability to efficiently and accurately process account redemptions and closures.”

I don’t think so.

I’ve heard this before: “Once you go robo, you don’t go back.”

That, and I wanted the first Internet timestamp for “run on the robos.”

FPPad’s best moments (i.e. outtakes) of 2015

As 2015 comes to a close, I want to take a moment to thank you for spending a few minutes each week watching my videos.

I hope that you feel informed about the constant change in financial advisor technology, you’ve made a few decisions to implement technology in your business, and that you have laughed a time or two.

I take what I do seriously and try to deliver the best technology news and information for you, but I don’t take myself so seriously.

I love what I do, and I know that my passion for what you do (giving sound financial advice to your clients) comes through in each video I make.

Special thanks go to my Executive Producer Steve Biermann, who has been my right-hand man in content production throughout 2015. Something special happens when the two of us put our heads together, and again, I think that shows in the content we create.

So here’s to 2015; we did a ton of work.

2016, you are officially on notice!

Betterment is poised to overtake Wealthfront in AUM

AUM 600In the race for robo adviser supremacy, neither Wealthfront nor Betterment wants to be runner-up.

Love it or hate it, AUM, or assets under management, is the default metric by which investment management businesses are benchmarked.

Robo-Advisor AUM

Certainly, many automated investment services (or rather, robo-advisors) have been flaunting their AUM figures in recent years, to, well, I don’t know why, exactly, other than to beat their chest on how good they are at gathering assets.

The most vocal automated investment service for publishing AUM figures is Wealthfront, with periodic blog posts issued when the company passed the round numbers of $500 million, $1 billion, and $2 billion in AUM.

Taking the more subtle approach to AUM milestones is Betterment, long viewed as the runner-up to Wealthfront in the AUM-gathering contest since 2013.

Instead, Betterment mentions the number of customers it serves first (in part because they have more than Wealthfront, so they can be number one in that comparison), followed by the level of AUM represented by their customers.

Still, there are a few posts from Betterment that place dates on when the company crossed $1 billion (with 50,000 customers) and $2.5 billion (with 100,000 customers). One has to dig through trade publications like TechCrunch and Forbes to put a date on earlier AUM figures like the company’s first $100 million and $500 million, respectively.

Ok, fine. So how is that asset gathering coming along today?

Graph of Wealthfront vs. Betterment AUM Growth

This morning I wanted to take a quick look at the AUM growth of the two leading automated investment services, Wealthfront and Betterment. But after 10 minutes of Googling, I had no charts or graphs of how each company is growing their AUM.

So I built a quick Google Sheet using the dates and AUM figures from most of the blog posts and articles cited above. Here it is!

Wealthfront vs. Betterment AUM Growth

Wealthfront vs. Betterment AUM Growth

 

So what is my biggest takeaway from this chart?

Betterment poised to overtake Wealthfront in AUM

Betterment has consistently lagged Wealthfront’s AUM since 2013, and Wealthfront’s growth rate was higher than that of Betterment, but then something changed around December 2014.

The rate of Betterment’s AUM increase accelerated, while Wealthfront’s growth rate generally remained the same from January 2014.

And the most recent figures for August 2015 show that Betterment has significantly closed the AUM gap with Wealthfront.

This being mid-August, and assuming Betterment’s faster growth rate continues as it has since the beginning of 2015: Betterment is poised to overtake Wealthfront in AUM.

What Happened to Betterment’s AUM Growth?

What happened to boost Betterment’s AUM growth starting around December 2014. I suspect the cause is:

Betterment Institutional

So not only does Betterment have its own client acquisition strategies (web banner ads, TV commercials, ads on taxis and phone booths in NYC…), now the company has a new salesforce, if you will, of investment advisers who are using the Betterment Institutional service for their emerging clients.

This new cadre of advisers likely stands at a hundred or so today, but as the popularity and appeal of automated investment services expands, potentially thousands of financial advisers may be directing their emerging clients to use the low-cost service.

This is a totally new salesforce and asset gathering funnel that Wealthfront lacks today.

So in the race to be the dominant VC-backed automated investment service measured by AUM, the guard is about to change.

And nobody wants to be number two.

Robo Advisors: What you pay versus what you receive

Robo Advisor: What you pay versus what you receive

Robo Advisor: What you pay versus what you receive

Low fees are good, just remember not to shortchange yourself on the services you receive.

Robo advisor is a perfect moniker and here’s why

tl;dr: Algorithms are incapable of giving financial advice, so the oxymoron “robo advisor” is a perfect moniker. Know what you’re getting (and not getting) from automated investment services.

“I am tired of the whole robo thing,” says Motif Investing CEO Hardeep Walia.

Personal Capital CEO Bill Harris bemoans, “We are not a robo advisor.”

Wealthfront CEO Adam Nash retorts, “New tech doesn’t always fit neatly into a bucket.”

Cry Me a Robo River

To the automated investment services, I say,

“Boo hoo.”

NOW these services are beginning to experience how it feels when others, right or wrong, control the conversation about their business.

Most journalists, reporters, TV anchors, correspondents, bloggers and more don’t really know what makes any of the automated investment services different from one another, so most simply package them up into one catch-all term “robo advisor.”

Let’s face it: “robo-advisor” makes for great click bait. If it didn’t work (and generate clicks and eyeballs), editors and producers would stop using it. (You clicked to land here, didn’t you?)

But please, asking everyone to stop using “robo advisor” because it misrepresents what you do or somehow marginalizes your service in some way?

I submit to you Exhibits A and B.

“You don’t need that guy,” gloats Wealthfront’s ad.

Sure, because most financial professionals out there are just glorified psychics, spiritualists, or stock market prognosticators whose only tool for financial advice is a crystal ball!

Please.

The financial services industry has seen this marginalization long before automated investment services arrived.

Living In Glass Houses

The fiduciary financial professionals should be just as upset about this gross characterization of fortune tellers as the automated investment service providers are about the term “robo advisor.” (people who live in glass houses…)

“Stop comparing us to fortune tellers!”

“We are not personal psychic advisors!”

Perhaps Wealthfront paints with too broad a brush. Ok, so here’s Exhibit C:

Wealthfront: Don't Pay For Expensive Financial Advisors

Wealthfront: Don’t Pay For Expensive Financial Advisors

See? “Don’t pay for expensive financial advisors.”

Why not?

Because Wealthfront is the end-all-be-all service that investors need? Because Wealthfront does the exact same thing all fiduciary financial advisors do? Because all your financial needs are met by Wealthfront’s software?

Ask a Question 100 Times…

Go ahead, go to any automated investment service website right now. Wealthfront. Betterment. Future Advisor. Even the anti-“robo-advisor” Personal Capital. (*read my note below)

Fill out their questionnaire. Complete a free “Investment Checkup.”

What is the answer you get?

The answer from ANY of these services is ALWAYS to invest.

ALWAYS.

There is no Plan B, no backup option, no alternate strategy.

There’s no, “You really should first pay off your high interest credit card balances.”

No, “You should save up an emergency fund where you can access the money quickly.”

No, “You should create a will and advance medical directives first in case something were to happen to you.”

But ask automated investment services a question 100 times, “What should I do with my money?” and the answer is always going to be the same:

Invest in a diversified portfolio of low cost ETFs.

It’s the only answer these services have. There’s nothing else.

It’s not financial advice. It’s not wealth advice.

It’s barely investment advice.

It’s an investment recommendation. The output of a calculator.

Sophisticated or not, automated investment services are ALWAYS going to recommend investing your money.

There simply is no other result to offer. The algorithms today are incapable of suggesting anything but investing.

So Why Robo Advisor?

So why robo advisor as a moniker?

Because it is a oxymoron, a name that contradicts itself.

Algorithms, software programs, aka “robots” are incapable of making judgment calls and evaluating emotions or feelings in the calculation process.

Robots can’t give advice.

Robots can only decide based on ones and zeroes. True or false.

Sure, an algorithm’s answer can be associated with a level confidence (recall IBM’s Watson playing Jeopardy), but each discrete answer is associated with a level of confidence based off of a set of discrete factors evaluated in the calculation process.

An algorithm’s output is a result. Functions return arguments.

But don’t call that advice.

Know What You’re Getting

As with most decision-making processes, there’s often a big difference in what you can do and what you should do.

What is important to you? How does a decision make you feel? How do you prioritize your goals?

Can your entire life, your goals, your dreams, your aspirations be captured in a four question survey? A ten question survey? Even a hundred question survey?

For automated investment services to survey the market and say “Hey, we can improve investing outcomes by building a software program that does everything on the cheap!”

The questionnaire is only part of the advice process, it is not the start and finish.

And then there’s the talk of disruption, mainly coming from the media (I don’t recall any of the automated investment services specifically saying they intend “to disrupt” the financial services industry).

What industry are automated investment services attempting to disrupt, anyway?

Vanguard, the mutual fund giant, has been offering diversified, low-cost investment products and services quite successfully since the 1970s.

Just remember that the next time you consider the services of an automated investment service, know what you are getting.

Do your homework.

You are getting the results of a calculator.

The calculator is programmed to give an answer.

Not advice.

Not from a robot.

Don’t assume that the answer you get is the best answer for your situation.

Who you are as a person cannot be summed up in an online questionnaire.

 

*Note: Personal Capital toes the line on the robo advisor definition. Users complete the Investment Checkup and receive a target asset allocation illustration based on answers to the short questionnaire. However, specific mutual funds and ETFs are not recommended, so it’s not explicit. Users do get a basic automated investment allocation recommendation with no human intervention, but it’s up to the user to connect each recommended asset to a specific mutual fund or ETF to purchase. Users who want specific fund and ETF recommendations must engage Personal Capital for traditional investment advice rendered by human advisers and pay Personal Capital’s standard fees. This formal engagement is not robo advice.

It’s a privilege to be named an InvestmentNews 40 Under 40 Honoree

I truly appreciate the opportunity to connect with you, the community of financial professionals here at FPPad, to help keep you informed and up to date on technology innovation in financial services.

And when someone recognizes my contributions to the industry, I feel that it further validates the passion I have to help financial professionals build better businesses with technology.

InvestmentNews 40 Under 40 Honoree

Investment News 40 under 40Yesterday, InvestmentNews released its inaugural 40 Under 40 project to recognize the talent, influence, and contributions of young professionals in the industry, and it is an honor to be one of the individuals on the list.

For more about the progression of my career since founding FPPad in 2008, I put together a short video to reflect on the last six years and to envision what’s ahead in the future of the financial advice industry.

Enjoy, and thank you so much for helping contribute to the success of FPPad!

InvestmentNews 40 Under 40 Entrepreneurs: (l to r: Kristen Luke, Jason Van Duyn, and Bill Winterberg)

InvestmentNews 40 Under 40 Entrepreneurs: (left to right: Kristen Luke, Jason Van Duyn, and Bill Winterberg)

The top 10 industry blogs for financial advisers

Caption

Michael Kitces’ Nerd’s Eye View blog caps this impressive list of sites every adviser should visit

These top ten blogs in financial services cover the spectrum of financial advisers’ information needs

So you want to know some of the best sources where I get my news?

RIABiz Top 10 Industry Blogs

RIABiz just released its list of the top 10 industry blogs for investment advisers. This is a collection of some of the premiere sites on the web you can use to transcend the challenges of being an independent financial adviser.

And yes, I have a vested interest in this list, as the site you’re visiting right now, FPPad.com, is ranked #3 in the RIABiz list.

Humble Beginnings

But before you head over to RIABiz to read the complete list, let me thank each and every one of you for your support.

FPPad first started as a blog about technology for financial advisers back in January 2008.

Six years later, I’m privileged to be listed as one of your go-to resources for all things technology in this industry.

So if you want to stay up to date on new industry technology, please subscribe to my free newsletter!

All set?

Now go over to RIABiz and read The RIABiz top 10 industry blogs — and what bloggers they recommend

Photo: RIABiz.com

FPPad Bits and Bytes for December 6

On this week’s broadcast, learn the hits and misses from the year’s most anticipated advisor technology survey, the pending termination of several financial planning software products catches advisors off guard, how the leading independent custodians are stepping up their technology, and more.

So get ready, FPPad Bits and Bytes begins now!

(watch FPPad Bits and Bytes on YouTube)

This week’s episode is brought to you by Angie Herbers Incorporated, a consulting and research company to financial advisory firms, who just released a new white paper called Take Two: The New Direction of Succession that addresses the key elements to create a successful transition to your junior advisors.

ahi 600

Download the Take Two white paper for free, along with other practice management resources, by visiting fppad.com/ahi

Here are this week’s top stories:

Tech Survey 2013: What’s New iIn Advisor Tech? from Financial-Planning.com

[Leading off as the top story is one of the most anticipated technology articles that comes out every year. The first of December marks the release of the annual Financial Planning Magazine Technology Survey, where Joel Bruckenstein digests over 1,100 responses about the various software programs and practice management tools used by financial advisors today.

So who are the winners and losers from this year’s survey?

Redtail Technology, Salesforce, and Tamarac Advisor CRM are the winners among CRM software, as advisors continue to embrace cloud-based technology, with slippage coming from Junxure, ProTracker, ACT, and Goldmine.

In financial planning software, this year’s results are essentially a carbon copy of last year’s survey, with MoneyGuidePro, eMoney, and MoneyTree claiming the top three spots.

And the same is true with portfolio management software, as the top 6 vendors are also a total repeat of last year’s results.

So who missed out on opportunities this year? The survey randomly selected new products from Blueleaf, inStream, and Market76, but found that few advisors had even heard of these relatively new players, which tells me that financial advisors, well, those who don’t watch Bits and Bytes, continue to be a challenging market for new providers to gain exposure.] The move to the cloud is finally taking place. In category after category of this year’s Financial Planning Tech Survey, we found software providers making the shift, and advisors responding.

NaviPlan financial planning desktop products to be discontinued from InvestmentNews

[The next story features news from Advicent Solutions, the company formerly known as Zywave, who provides a suite of financial planning software to advisors under the NaviPro brand.

In an unexpected announcement to some users, the company announced it will sunset six of its NaviPlan products on March 31, 2014, citing an “ever-changing marketplace.”

Going away will be all of the NaviPlan Extended and NaviPlan Standard desktop-based variants, making the cloud-based NaviPlan Premium and NaviPlan Profiles the sole applications that will receive ongoing support and enhancements in 2014 and beyond.

This news reinforces the trend of advisors adopting cloud-based solutions as seen in the Financial Planning Software Survey, so don’t be surprised when other providers announce the discontinuation of their own desktop-based software in favor of cloud-based alternatives.] NaviPlan financial planning products for desktop computers will be discontinued as the owner develops its NaviPro products for online use.

Plowing Ahead from FA-Mag.com

[Software providers aren’t the only ones making big changes in advisor technology, as four of the major custodians are also investing heavily in advisor-facing technology in a very competitive arms race. Once again, Joel Bruckenstein interviewed executives from Fidelity, Pershing, Schwab Advisor Services, and TD Ameritrade Institutional to reveal their strategies to help make advisors more efficient and more profitable through enhanced technology.

There’s a ton of great information in this article, so be sure to read it to see what your custodian is doing to help you grow your business.] Over the last several years, custodians have been investing in advisor-facing technology like never before.

Envestnet | Tamarac’s Advisor Xi(R) Platform Added To Pershing’s NetX360(R) Technology Channel from WSJ.com

[And finally, one company benefiting from custodian technology enhancements is Envestnet|Tamarac. This week, the company announced that its Advisor Xi suite will soon integrate directly with Pershing’s NetX360 custodial platform, giving advisors straight-through processing capabilities for trades in accounts held at Pershing, as well as access to real-time custodial account data.

The real-time data feeds will compliment existing integrations with Schwab and TD Ameritrade supported today, and expand straight-through processing trading capabilities announced at Schwab IMPACT several weeks ago.

Tamarac anticipates that the new integrations will roll out to its 660 firms during the first quarter of 2014.] Envestnet | Tamarac, a division of Envestnet, Inc., a leading provider of integrated, web-based portfolio and client management software for independent advisors and wealth managers, announced today that it has formally begun the integration of its Advisor Xi(R) platform into Pershing’s NetX360(R) custodial channel for investment professionals and Registered Investment Advisors (RIAs). Advisors will have access to this integration in the first half of 2014.

 

20131206 episode thumbnail 600

Watch FPPad Bits and Bytes for December 6, 2013