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Financial Advisers Disrupted By AI (bloomberg.com)
schwit1 writes: Banks are watching wealthy clients flirt with robo-advisers, and that's one reason the lenders are racing to release their own versions of the automated investing technology this year, according to a consultant. Robo-advisers, which use computer programs to provide investment advice online, typically charge less than half the fees of traditional brokerages, which cost at least 1 percent of assets under management.
A lot of American and Canadian retirement accounts are in "age adjusted" funds, which are really just a mix of mutual funds or ETFs of bond funds and stock funds.
If you check, you'll find most large firms have an S&P 500 index from Vanguard or Fidelity (like the VINIX) which has an expense ratio of around 0.02 or 0.04 percent, and a Total Stock Market index with an expense ratio of around 0.05 or 0.07 percent and a Total Bond Market index with an expense ration of around 0.10 or 0.12 percent.
You could replace the "age adjusted" fund that charges you 0.40 to 0.65 percent with an automatic stock fund and bond fund allocation, e.g. 70/30, and then just reallocate periodically. Cost to you drops from 0.40 to 0.05 percent, in many cases.
That's all these "wealth firm robots" really do. You can buy the underlying components and pay less.
It's the fees that kill you. You don't notice them when returns are 12 percent, but when the market is crawling (like today) with 1-2 percent returns, you sure notice the fees that siphon off up to 1/4 of your earnings.
-- Tigger warning: This post may contain tiggers! --
Well, financial advisors have often (not usually, but often) been out performed by random number generators. So it shouldn't be hard to do better than they do.
I think we've pushed this "anyone can grow up to be president" thing too far.
To make big money it's a combination of being at the right place at the right time and step on quite a few toes.
If builders built buildings the way programmers wrote programs, then the first woodpecker would destroy civilization.
Investing in a diversified selection of index funds and staying the course will beat that vast majority of professional advisers. And the few advisers that will beat the market are not identifiable ahead of time.
You are confusing Financial Advisors with Fund Managers.Retail Financial Advisors you get to meet for "free" at your local financial institutions are pretty much McDonald workers of financial world in terms of hierarchy. Their job is to sell you whatever makes the most money/commission to the institution and themselves while pretending to care about your goals. They usually have no or low qualifications and follow simple scripts. Fund managers are actually the one managing (ie investing) money.
The oncoming destruction of the market will be the fault of shit like this and high-frequency trading run amuck.
A few numbers go "boop" and that triggers some insane sell-off, which cascades into further panic selling which triggers some out-of-band responses which lead to more extreme selling and/or buying...the much-vaunted "financial circuit breakers" fail or are overridden in a desperate attempt to salvage what little is left and by the time it's over the entire stock market will be worth the price of a used Buick.
You wake up to find out your retirement account will barely buy you lunch at McDonalds, but thankfully the hedge fund managers are still okay.
Just cruising through this digital world at 33 1/3 rpm...