FINANCIAL ADVISOR INSIGHTS: Flesh-And-Blood Financial Pros Can't Just Ignore The Robo-Advisor
Nov 1, 2014, 03:27 IST
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To Beat The Robots, You Must Join The Robots (Financial Advisor Magazine)
Charles Schwab and Fidelity Investments unveiled "robo" advice programs that offer relatively inexpensive, algorithm-driven portfolio-management programs for investors. This follows several others including Ritholtz Wealth Management. Obviously, this has gotten traditional advisers nervous.
The best way to "beat" the new crop of robo-advisers is to join them. Advisers at other firms should also start to offer online services to clients. For example, Merrill Lynch recently rolled out with Merrill Clear, a digital service that allows advisers to help clients plan for retirement.
"Flesh-and-blood advisers who use digital tools have an advantage over algorithms because they can 'marry technology and human behavior,'" said Daniel Satchkov, the president of Rixtrema.
The European Government's 'Shutdown' Isn't Going To End Well (Charles Schwab)
The European Central Bank was basically shut down following the enactment of a more aggressive stimulus: two government-led plans including the ECB bond-buying program and the Trans-Atlantic Trade and Investment Partnership were effectively ended. This is critical because these two plans were a large part of plan to save the eurozone.
"A year ago the US shutdown ended with a bang, as it was resolved fairly quickly, clearing the way for a strong 2013 for US stocks and continued economic growth. However, we think the shutdown in Europe is more likely to end with a whimper, as Europe's economy and stocks continue to suffer at its own hands," writes Jeffrey Kleintop.
Ultra-Wealthy Clients Have Global Needs (Financial Planning)
Ultra-wealthy clients are living increasingly global lives, and so their finances must also be addressed in a global manner. "The world has become more global and clients have become more global. They expect to be able to work with the entire bank," says Chip Packard, the cohead of wealth management at Deutsche Asset and Wealth Management.
Additionally, banks are increasingly attracting wealthy clients outside of the US, who also needed to be served locally. So as time goes on, banks and advisory firms will be addressing these changes in wealthy-clients preferences.
UBS Wealth Management Is On Par With A Major Rival (The Wall Street Journal)
"The UBS AG's Wealth Management Americas unit saw strong inflows, but poor market performance during the third quarter outpaced those gains," reports Michael Wursthorn. "Still profit rose at the wealth management group on higher operating income for the quarter."
However, the productivity of advisers was up by 9% from last year, and up 1% since the second quarter. The US advisers had up to $1.08 million in average revenue. This puts UBS on the same playing field as its rival, Bank of America's Merrill Lynch brokerage group, according to Wursthorn.
It's Not About Minimizing Risk, But Rather About Being Adequately Compensated For That Risk (Morningstar)
"[I]nvestors need to understand that every investment comes with risk. There's no such thing as a risk-free investment, expecting maybe Treasury bonds. But certainly when it comes to stocks, every company involves risk, and it's a matter of understanding which risks are worth taking and which risks are being rewarded for," says Matt Coffina.
It's also important to understand what "risk" means. It's not volatility that's important, but the fundamental risk to business. In other words, the things that can affect a company's intrinsic value negatively in the long run.
There are 12 such risks: business-cycle risk, industry-cycle risk, technological-disruption risk, competition, regulatory risk, interest-rate risk, financial-market risk, commodity-price risk, currency risk, stewardship risk, event risk, and valuation risk.