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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.
And who trusts Financial "Advisors" - regardless of if they are human or AI?
If builders built buildings the way programmers wrote programs, then the first woodpecker would destroy civilization.
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! --
Oblig Manna link.
And FutureAdvisor provides robo-analysis for free. Sure, you can pay them 0.5% a year to manage your portfolio for you, but they tell you everything you should do.
Of course, they go heavy on international funds and REITs, and you can't have it tilt funds in the direction you want. But they encourage extremely low-cost index funds and seem to be a good option.
If someone hacks these, we're all in a world of pain. Everyone tanks simultaneously, there will be huge layoffs everywhere all at once and no vacancies for the month it takes to realize that they kicked the wrong kids out. In short it's industry's event horizon for infinitely gauche rear end negative money pain. Ouch!
The purpose of existence is to make money.
You have been replaced by a small shell script.
I don't understand why the term financial advisor is used when they are just salesmen. What advice do they provide other than, "you should definitely buy our products", or maybe, "I would advise you against closing your account with us"?
I have one retirement account that's managed and another where I self-direct the investments. My self-directed account has been out-performing the one where I have an "advisor". I know I would never in a million years go to him for financial advice and am just about ready to close that particular account.
Most of the people using these "Financial Advisers" and paying 0.5% to 1% of their retirement portfolio are only really getting standard advice that is available on just about any mainstream stock market 101 for retirement website. It really isn't worth the fee unless you can't be bothered to do basic reading. For financial advisers this is just a gravy train. There is no "Artificial Intelligence" behind it. You could get the same thing off of a simple spreadsheet.
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...
..nuff said.
I stopped when I hit the 7% and I realize I'm just some guy on Slashdot. 7% is fine, nice and safe, and smart. Don't touch it. Don't fiddle with it, don't poke buttons, don't start watching the financial news, don't start reading the industry magazines, don't start doing you own work and watching stock tickers. Don't do it...
If you do do it then don't be greedy and get out when you can - but make sure to invest long-term (depending on what you're doing) as you're taxed at a lower rate. So, find a few interesting companies and dump a chunk into them and just sit. Wait a year and keep sitting. It'll spike unless you picked wrong. Do not even watch the tickers or check the prices. Set your sell price, this can be done automatically, and then just do it again.
However, take your 7%. 13% is not too much to ask for but pay attention to the do not be greedy part. I mean that. With the latter, set it at a crazy number and wait. Put it this way, I bought 2000 shares of Tesla when they were at about $24. They've not yet hit the price where they'll be unloaded automatically. (I adjusted the number - up.) However, there's a certain sell-by date (announcement, actually) for me. I'll bail then and have made a very tidy profit. I'm not actually sure what today's prices were and I'm not gonna bother looking. You can do the math yourself if you'd like.
"So long and thanks for all the fish."