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Vanguard, Schwab, and the rise of the robo-adviser
Old 04-09-2016, 05:10 AM   #1
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Vanguard, Schwab, and the rise of the robo-adviser

Some interesting demographic info here. Startups vs legacy firms, boomers vs 'kids', etc.

The Vanguard Cyborg Takeover - Bloomberg

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Old 04-09-2016, 06:16 AM   #2
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Interesting that the title and cover illustration feature a cyborg (negative connotations) but the closing paragraph with a quote from Burton Maljiel which seems to reflect the author's perception is:

"As happened with index funds, cut-rate competition will push fees down for all kinds of advice, and more people will be able to get help building portfolios. “The presence of Vanguard and Schwab—consumer-friendly companies—is a good thing, not a bad thing,” Malkiel says."

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Old 04-09-2016, 07:16 AM   #3
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If one follows the MPT approach... a diversified investment portfolio and periodic re-balancing, what is the FA really doing... ok, hand holding.
Even with the personal interaction with Vanguard, I expect it will be hard for the "adviser" to really get to know each client. With the right people skills and a good CRM, they may be able to make it look like do.

Face it, many live advisers use mostly the same portfolio for each person with the same risk tolerance (with a possible shifting for age). Its not like they generate a new portfolio uniquely for each client.
The difference will be the make up each companies portfolios between these robo advisers. I would expect those to converge over time or people may choose their adviser based on past performance if they can get the data.
The area that is left is other financial planning. What $ should be used beyond the robo adviser's reach: rental real estate, MLP(?), tax planning (roth conversions) and so on. I would hope the robo advisers could support the concept of putting the appropriate type of investments in each account type (for tax efficiency). They may not be there yet... and this may require some optimization on the individual level.
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Old 04-09-2016, 07:30 AM   #4
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Originally Posted by bingybear View Post
If one follows the MPT approach... a diversified investment portfolio and periodic re-balancing, what is the FA really doing... ok, hand holding.
I'm guessing most folks wouldn't know MPT from MTV. So even just getting people into a diversified portfolio that reasonably matches their needs is a huge service. And then if the FA can keep them from jumping in to and out of the market based on the latest headlines they'll have more than earned their paycheck.
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