Tag Archives: Hardeep Walia

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.

FPPad Bits and Bytes for January 16

On today’s broadcast, learn about new updates from eMoney Advisor and Redtail CRM, plus, learn what four technology experts are saying about trends you need to watch in 2015.

So get ready, FPPad Bits and Bytes begins now.

(Watch FPPad Bits and Bytes on YouTube)

Today’s episode is brought to you by Building Trust Online, a new business I founded with my executive producer Steve Biermann. You probably already know that videos like this can help you build relationships and trust with clients and prospects who are looking for you online, but you’re not sure how to get started and you’ve never been trained to be confident in front of the camera.

Building Trust Online

Learn more about our coaching and media skills training by visiting buildingtrustonline.com, and sign up for the free newsletter while you’re there.

Here are the links to this week’s top stories:

Tech Review: eMoney’s Next Generation from Financial Planning, and

Work smarter with Redtail CRM from Redtail Technology

[Now this week’s news you need to know comes from two popular software providers in the advisor technology marketplace. First up is eMoney Advisor which announced the release of emX back in mid-December.

emX is a radical and refreshing redesign of the original 360 and 360 Pro products from eMoney, and includes new features like mobile-friendly access for advisors, co-browsing and presentation modes, and deep integrations with many of the industry’s other leading technology providers.

One of those integrations is with Redtail Technology, which is the source of the second update you need to know. This week, Redtail officially rolled out the third iteration of its CRM software dubbed Project Tailwag. Just like eMoney emX, Redtail’s Project Tailwag modernizes the look and feel of the CRM, adds mobile-responsive design, and includes feature enhancements to notes, activities, and contact information in response to advisor feedback.]

Advisers + Technology: Better than Either Alone? from the Journal of Financial Planning

[Rounding out news you need to know this week is a panel discussion moderated by Michael Kitces for the January edition of the Journal of Financial Planning. Industry authorities Joel Bruckenstein, Steve Lockshin, Hardeep Walia, and yours truly tackled tough questions from Michael on the technology trends you need to put on your radar right now.] Leading tech experts Joel Bruckenstein and Bill Winterberg, along with the heads of two prominent platforms, Hardeep Walia of Motif Investing, and Steve Lockshin of Betterment Institutional, discuss how technology can create better advisers.

 

Watch FPPad Bits and Bytes for January 16, 2015

Watch FPPad Bits and Bytes for January 16, 2015

 

FPPad Bits and Bytes for July 11

On today’s broadcast, Junxure Cloud has officially arrived after several years of delays. Will the features in version one make it worth the wait? Wealth Access continues its growth as a personal financial dashboard for high net worth clients. Does it have what it takes to get advisors to stop using Mint.com? And consulting firm QuonWarrene announces a new technology audit service. Find out how their service can help move your firm’s technology in the right direction.

So get ready, FPPad Bits and Bytes begins now.

(Watch FPPad Bits and Bytes on YouTube)

Today’s episode is brought to you by ITEGRIA, providers of complete outsourced technology support, security, infrastructure and IT solutions exclusively for RIAs.

itegria - providing a 360-degree, comprehensive approach to financial advisor IT needs

To learn how you can keep your data safe from attackers, download a free copy of their latest white paper on social engineering attacks by visiting fppad.com/itegria.

Here are the links to this week’s top stories:

Junxure Announces Wide Release of Junxure Cloud CRM for Financial Advisors from PRNewswire

[This week’s top story covers two CRM providers in financial services. First up is Junxure, which issued a press release announcing the general release of its long-awaited Junxure Cloud product after what seems like an eternity in development.

The Junxure Desktop product has always been a top contender among CRMs for advisors, but as firms became more comfortable with software in the cloud, Junxure lacked a completely web-based version of its CRM. With Junxure Cloud, the company finally has an answer.] Junxure CRM, an industry-leading practice improvement firm for financial advisors that integrates CRM technology, consulting, and training, today announced the general release of Junxure Cloud™, its comprehensive, cloud-based CRM/office management solution for financial advisors.

ProTracker pulls cloud-based CRM back into beta from InvestmentNews

[But another CRM provider with a web-based solution has actually pulled its software out of general release and put it back into beta testing.

The CRM is ProTracker Cloud, which is built on top of open-source software called SugarCRM. Warren Mackensen, president of ProTracker Software, said he suspended product sales earlier this year, citing dissatisfaction with its look and feel and feedback from customers. Mackenson did not offer insight as to when ProTracker Cloud will once again be available for purchase, but as soon as I know, I’ll be sure to share the update with you.] Eight months after announcing the launch of a cloud-based customer relationship management product for advisers, ProTracker Software Inc. has stopped selling its ProTracker Cloud CRM while the company fixes some kinks in the product.

Wealth Access Experiencing Rapid Growth and Momentum in Wealth Management Industry from PRWeb

[Next is an update from Wealth Access, a high net worth personal financial management platform I originally covered for Morningstar Advisor back in September 2012. The company has come a long way in two years, as it now aggregates $7 billion in assets and has a grown from a team of two people to over 17 today.

Wealth Access works a lot like Mint.com and eMoney Advisor, but caters to high net worth clients that typically own real estate, hard assets, and collectibles that can’t be updated with simple account aggregation.

In addition, clients have granular control over who can see their account information. For example, CPAs might be able to view just the accounts that generate taxable income, while wealth managers have permission to see all of the client’s investable assets. So if you want to offer something like Mint.com to your clients, but with more sophisticated account management, then Wealth Access may be worth exploring for your business.] Wealth Access, an innovative high net worth personal financial management platform for advisors, announced today several milestones that represent fast growth and adoption of its industry leading technology. In only its third year, Wealth Access now reports on $7 billion, adding an additional $600 million per month, up from $250 million per month in 2013.

QuonWarrene Announces Spot-Audit Service from QuonWarrene.com

[And finally, many of you come away with great technology ideas from my Bits and Bytes broadcasts, but you’re still looking for some guidance on where you should focus your efforts. In addition to the consulting services I provide to advisors, there’s a new service available from Quon Warrene, an advisor consulting firm, called the Spot Audit™.

The QuonWarrene Spot Audit is an efficient way to address the technology challenges you face in your business. Start by completing a questionnaire about your existing technology, then participate on a collaborative conference call, and then receive an assessment report score card with recommendations on what you should tackle first. So if I don’t have immediate availability for technology consulting, QuonWarrene now gives you another option to identify where you can make improvements in technology.] QuonWarrene today announced an expansion to its services tailored for financial advisors and institutions, introducing the Spot-Audit.

Here are the stories that didn’t make this week’s broadcast:

Amazon Zocalo from Amazon.com

Amazon Zocalo is a fully managed, secure enterprise storage and sharing service with strong administrative controls and feedback capabilities that improve user productivity. 

Pershing Announces the Next Generation of its Block Trading and Rebalancing Tool for Advisor-Directed Programs from MarketWatch.com

Pershing LLC, a BNY Mellon company, today announced the next generation of its block trading and rebalancing tool—delivered through its technology platform NetX360®—which offers a series of new capabilities for advisors.

Be a robo-adviser, the human way from InvestmentNews

It’s not hard to see why robo-advisers are generating so much buzz: They purport to use powerful technology to deliver what they call tailored investment recommendations at a fraction of the cost of traditional investment managers. That’s a pretty compelling proposition, especially for newbie investors.

 

Watch FPPad Bits and Bytes for July 11, 2014

Watch FPPad Bits and Bytes for July 11, 2014