The Rich Are Already Using Robo-Advisers, and That Scares Banks
bloomberg.com
bloomberg.com
Use a roboadvisor (or a moral equivalent like a target age retirement fund from Vanguard). If you need someone to talk to, the magic words are "fee-only financial planner" -- should cost on the order of $100 to $200 a year for a sympathetic ear that can tell you "Yep you're still on track and not doing anything insane."
Edit: forgot the jargon here -- some fee-only planners still charge a percentage. You want someone quoting a flat fee or hourly rate.
[+] No financial planner has predictably better-than-market advice regarding investment choice than any other planner -- though heaven only knows how many intimate they do. To the extent they provide a valuable service it is similar to an accountant's: they can hear the totality of your situation and tell you about options/factors you may not have considered, allowing you to sleep better.
A representative question: "What's a good way to save for college given we have a 5 year old? What type of account? What general plan? Ballpark how much?"
Maybe call the upper limit ~$10 million?
It also only impacts non-tax advantaged accounts and investments and provides much less value than advertised. In fact iirc Betterment's own white paper on this demonstrated it's expected savings to be far less than what Wealthfront was marketing at the time.
http://www.etf.com/sections/blog/23212-inside-robo-advisor-t...
The crazy income optimization schemes you hear about mainly circle around windfall earnings in areas like finance and private equity. US already taxes investment proceeds at favorable rates, and there's no inherent tax on wealth, if the recipient doesn't start working, his income picture won't be too complicated.
When you pay for "investment advice" at the $50 million net worth price tier, you're paying for access to private equity deals, real estate investment opportunities, a tax advisor who can tell you how to be structure a deal abroad, etc. It's not as simple as plugging in your salary and age into a webpage and having a robot buy and sell stocks for you.
You'll get a pretty nice report of your portfolio and (market) returns. Spiral bound and everything.
If you want an accountant for international issues, I question the wisdom of doing that unless life/business naturally throws them your way, but $500k buys an awful lot of hours from someone who knows the transaction and localities involved, which your investment advisor does not. (Will every investment advisor in the Chicago phone book happily take a $50 million client who wants to spend $5 million on a modestly nice house in Tokyo? Yes. Do any add value to that transaction? Well, maybe one does. Could you find much better advice? Oh heck yes.)
Wealthy individuals have access to investment strategies that resemble far more the philosophy of large pension funds than that of robo-advisors. (You can also check out Tiger 21, a sort of investment club for Wealthy people, they post their recommended asset allocations on a regular basis.) They also tend to be more focused on capital preservation and minimizing volatility than strictly beating the market. Their portfolios are typically highly diversified outside of publicly traded assets to accomplish that.
Finally, the firms that work with them offer significantly more for their money. Detailed estate planning and legacy planning, tax planning, corporate tax planning, and advice on charitable foundations and more.
While I do agree with some of what you are saying about how "advice" is priced, particularly when it comes to the mass market, there is definitely a point in the wealth of an individual where there couldn't be more points of difference between what people get in terms of financial advice.
Source: I've worked at a wealth management firm that dealt with HNWI for quite some time.
Edit: Just to add a bit on the different this makes for HNWIs
At the firm I worked at their client's biggest losses throughout 2008 were no more than 6-7% (after fees were considered), while at the same time being invested in assets that yielded nearly that much in cash flow through dividends, interest, etc. that same year. Since a portion of the portfolio was also invested in public equities (around 30%) and because these client's could easily stomach the markets considering their personal performance they were able to ride it back up without fleeing to cash like so many others did.
One of the problem smaller investors face is that in major market crisis situations almost all publicly traded assets take a hit as the mass market migrates to cash. If you follow the herd (as most obviously do or they wouldn't be the herd) you regularly miss out on the benefits of these market movements.
I know these are naive questions, but here goes: do those pension funds differ greatly from large university endowments? How do those differ from what one can achieve using a combination of cheap index funds? Ramit Sethi famously recommended an allocation based on David Swensen's experience managing the Yale endowment. You can find index funds to match that reasonably well. How different will that be from what Yale or a pension fund actually does?
The problem with using public index funds to mimic these managers asset allocations is the higher volatility of publicly traded assets. For example in 2008 widespread panic caused people to sell their mutual funds and flee to cash which widely hold a variety of assets, so all of them suffered. This included publicly traded Real Estate Investment Trusts (REITs). At one point they were selling for 80% of their on paper asset value, which was entirely irrational. Many money managers that typically invested privately in commercial real estate because of that volatility took that opportunity to buy public REITs at a discount.
That being said, you can definitely do a decent job of adding asset class diversification with modern ETFs (and the market for these keeps growing). There are now infrastructure ETFs, REITs (Vanguard's REIT is really well priced), covered call ETFs, etc. Just don't expect to get exactly the same results of these managers and expect to have to handle larger volatility.
That being said, if you can weather these market movements, and you are saving regularly, volatility can be a good thing, if you can take advantage of lower asset prices with ongoing contribution then that is great.
And you can get aces to property by inversing in REIT's
> people who earn a millions, but are not savvy
> investors end up broke
Restaurants are a classic example of money pit 'investments', but so are a lot of real estate deals etc.
In the case of $50m, you can fully invest it in the stock market, but you need to be ready for wild fluctuations in your wealth. You also need to make sure the brokerage you gave the money to is reputable, or multiple brokerages. (SIPC only covers up to $500,000). You also may accidently buy overly correlated products without knowing it or may think you are buying low risk (bond funds) only to find out that they had super high duration (risk from insurance rates changing).
You can always put it in banks, but even that can be risky in times of extreme turmoil. During the last crisis, there were about 6 months when people were genuinely unsure whether all major banks would stay solvent. You are only insured to FDIC limits which will not come close to $50m.
You could go with real estate, 100% cash purchase, where you have no debt. (no leverage). As long as you pick a liquid asset class, that is likely safe, but you still need to insure the property and make sure your management team is running it properly which requires a lot of hands on work. You could still lose a lot of money if rates go up etc.
Having $50m is really a mo money mo problems scenario. A robo advisor can't fix it if you don't want 100% stock market exposure. I also don't think expensive advisors fix it either.
SPY, QQQ, etc only go up as the economy goes up...
Volatility doesn't seem to have as much power when the potential losses are not great enough to cripple you.
That's precisely why wealthy investors want to minimize volatility. They don't need their wealth to grow (they already have more than they need), but they definitely don't want it to disappear.
Also, I must say that $500k really isn't that much money—it's not even enough to retire.
Which should have been "risk from interest rates changing."
To add a little nuance: I always recommend a flat fee financial advisor too, but there are people and funds capable of consistently beating the market. They are just so exceedingly rare that it's difficult to separate them and their results from the crowded noise of people who either think they can or who know they can't but will claim they can anyway.
Still, most investors ("retail investors") should use an index fund.
Just a minor point that bears mentioning.
Is there any objective evidence that there are people who consistently beat the market, over the long term? (And let's factor out those who use insider information)
He is much more than an investor. He takes a large enough position in his investments so that he has control (or major influence) in how his companies are run.
From https://www.gsb.stanford.edu/insights/what-it-be-owned-warre...:
"The subsidiary chiefs also believe their companies’ performances are better under Berkshire (and even better than if they were stand-alone companies). Respondents point to Berkshire’s brand value and financial strength. Another reason? Berkshire lets CEOs focus on a longer performance horizon than they would expect under other ownership. Although each CEO varied on what that horizon would be, with estimates ranging from three years to 50, they all said Berkshire management encourages a long-term focus."
Seth Klarman's Baupost Group averaged a 20% return between its founding in 1982 and 2015.[2] This is a 33 year term, during which the S&P 500's average annual return was 8.8%.
Average annual return is not the whole picture (i.e. it is theoretically possible to have a phenomenal single year and mediocre performance for 9 years and thus beat the S&P 500 over a 10 year period) and there are other examples, but these should suffice.
[1]: http://www.bloomberg.com/news/articles/2015-06-16/how-an-exc...
[2]: http://www.octafinance.com/hedge-funds/seth-klarman-baupost-...
It would be very risky to assume that their advantage will continue in the next 20 years.
I certainly meant it in that sense. I'm not accusing the Medallion of illegal front running.
I think people like Brad Katsuyama and fixing the "early information" problem are the answer to this kind of behavior. Katsuayama is working on a system to make the fight between high frequency traders and other investors more fair. Good write up is here : http://www.nytimes.com/2014/04/06/magazine/flash-boys-michae... ...
"Coil the fiber. Instead of running straight fiber between the two places, why not coil 38 miles of fiber and stick it in a compartment the size of a shoe box to simulate the effects of the distance. And that’s what they did."
Brad Katsuyama's dark pool is definitely deceptive.
Play on.
Of course, this doesn't mean that this performance will necessarily continue indefinitely; knowledge diffuses, and their strategies will eventually become public, turning from "alpha" into "beta" (like trend following has in the past). They need to keep innovating to continue beating the market.
Also, the biggest issue of strategies like this is that they are severely constrained - you just can't put more than a certain amount of money into them. In contrast, some other strategies are much less constrained; like trend following (CTAs manage tens of billions of funds), and global macro (Bridgewater manages 50bn).
the only half-true statement you made was about scalability. like, theoretically every strategy has a limit to its effectiveness and i guess you can argue that algo-based trading funds should be limited in size and scope. but compare that to seriously unscalable fields such as venture capital, where the constraints are in lack of investment targets, need for GP's to consult/manage, domain expertise more important for companies w/o sec-standard accounting, covenants blocking investments in previously funded companies - in essence, high human capital costs. implementing an extra algo strategy is much less human-intensive, which might suggest easier scaling (though nowhere near mutual funds, etc)
The number of trades does not determine alpha, but it means that you can be much more certain about whether someone has alpha or not. For example, John Paulson made billions on (essentially) a single trade in 2007 and early 2008. Does he have alpha? It's hard to say, because all of those profits were from one trade, and he could have been lucky. Virtu Financial generates millions of dollars each year, by making tens of millions of trades. Do they have alpha? Absolutely - you can be certain of it, because it would be statistically impossible to get lucky tens of millions of times.
The idea "alpha becoming beta" is an extremely relevant one for many hedge funds today. As strategies become well known, they become commodified, and are often offered at a lower fee, both by hedge funds, ETFs and investment bank products. Frequently, they are offered for little or no performance fee, so they cannot be called "alpha" and are often referred to as "smart beta". For example, AQR Capital Management offers many low-fee funds giving exposure to value investing, momentum investing, managed futures, the FX carry trade and others. It sounds like you are using a very narrow definition of beta (exposure to the stock market) whereas the usage in the industry is much broader.
Pointing out that quant funds use "algorithms" to trade rather than "computers" is pointlessly picking holes. It's clear what he means.
Quant funds don't trade with computers - in fact, computers trade instead of humans.
> the number of trades you make doesn't determine alpha
No, but it does determine how statistically significant your alpha is. If I make 1 good trade, it might be alpha or it might be a lucky guess. If I make 10000 good trades, it's unlikely to be just a lucky guess.
> certainly no sense to 'alpha becoming beta.'
Trend following used to be "alpha", but now it's considered "beta" - in the sense that everybody can replicate it, and there is no specific "alpha"-based fee warranted for a fund executing trend-following strategies.
> there is no a priori reason that their strategies must or will become public
the more people know about it, the easier the math behind it, and the more broadly it applies, the more chance there is that it becomes "public" knowledge (public in the sense that many industry practitioners working for different funds know about it)
> but compare that to seriously unscalable fields such as venture capital
Well, given that quite a few venture funds are bigger than $10bn [1], I wouldn't call that "seriously unscalable". But in any case, my comparision was to trend following (Winton has about $30bn), global macro (Bridgewater's Pure Alpha has about $50bn), and passive index investing (SPDR S&P 500 ETF is > $100bn).
[1] http://www.forbes.com/sites/alexkonrad/2015/03/25/midas-top-...
I think Renaissance's track record only answers the first question. But apparently the last few years have been really tough for quant funds, some strategies actually lost money on average. And I'd have no idea how to separate well run quant funds that like Renaissance that can withstand changing market conditions and funds that will fail when market conditions change. Also, I'd be a little nervous assuming that a well run fund will stay well run.
I think that some managers do have actual skill, and would provide value. But I think that trying to find those managers would usually be really difficult.
I'm not sure what the performance was in 2005. In 2006 they were down 16% (because of premiums on their CDS positions) which they then recouped in 2007 and early 2008.
This is narrowing the problem to growth investing. Most high-net worth individuals care about growth investments only tangentially, the agenda is usually income generation.
With income generation one can consistently beat the market year over year over long term. Simplest examples would be a cash-flowing real estate investment at an attractive entry price.
If you believe that public markets are efficient, then it also implies that by the time you're on the buying side, any inefficiency and pricing discrepancy has been squeezed.
You can see all their track records based on completely public information. Every scraped article and piece advice is public and the methods are published in https://www.johnson.cornell.edu/Entrepreneurship-and-Innovat...
It is not unusual for someone with $50m to pay $10-30k just for an initial session with a firm they are considering working with and then more ongoing. Many of these people wouldn't even consider working with someone who doesn't charge that as they will immediately assume you are not experienced or skilled enough to handle their needs.
As with any business, customers often expect to get what they pay for, and pricing to your market is important.
[1]: XY Planning (http://www.xyplanningnetwork.com/advisor/) is one example I can think of, and I believe they also work with Betterment for the investments. http://www.thinkadvisor.com/2015/02/27/xy-planning-brings-be...
I get the sense that there are many in this thread who are either in the industry or have been convinced to drink the koolaid themselves. I'm seeing lots of handwavey talking points but no substantial data-supported explanations for why the high priced advisors are anything more than gifted salespeople.
As my own counter example I know someone who did exactly as you suggested. A one time meeting with an advisor to review his portfolio and asset allocation but invests for himself online. It took about 2 hours and cost $500 and didn't include any detailed financial planning (e.g., taxes, retirement projections, etc.) it was simply a portfolio review.
So even using the lowest and simplest example I could find the cost is much higher than suggested. Additionally, I was also told this advisor was fairly reluctant to even offer this. This, generally speaking, just isn't their model. Even in the fee-only market they are typically looking to work with people on an ongoing basis, not one off.
As a more general example, in Canada some people work with "money coaches" who focus more on financial planning, saving habits, debt consolidation, retirement income planning, etc. They charge around $1-2k for a four meeting package. My understanding is that these prices are similar in the US but I could be wrong.
The bottom line here is that I'm just not aware of a market of financial advisors charging one time fees anywhere near $150. That's just how it is.
>> I get the sense that there are many in this thread who are either in the industry...
I suppose finance must be the one industry where people outside of it know much more than those in it.
- tax-sensitive allocations (i.e. munis in taxable account, reit, total bond in tax advantaged account) - Continuous tax-loss harvesting - Continuously adjustable allocation - forecasting and allocation advice - "goal based" accounts
Also user experience is worth something for some people: - UI/Apps - statements, trade confirms, tax forms - electronic only (no reams of paper sent to you) - ease of transferring funds in/out
Also note that it can be cheap. WiseBanyan is presently free (charging 25bp to turn on TLH). Betterment at 15bp ends up being only 10bp more than Vanguard's Target date funds funds at 18bp.
Given how much fees can affect returns, I might pay for Wealthfront's services, but I wouldn't pay a lot, and "$250/year per $100k" seems like too much.
I cannot disagree more. At 50m you have a totally different perspective in this day and age. Investment for profit is often not the primary concern. Wealth protection, transfer from one generation to another, access control, family members, lawsuits ... lots of things that are not relevant with 50k in the bank but become big deals with 50m. The investment advice sought and offered to those with 50m to protect is altogether a different product than that offered to those with 50k.
If you have 50m in the bank, "saving" for your kid's college expenses is a radically different question than if you only have 50k. Protection is far more a priority than any 'saving' concept.
And taxes! That tiny amount of interest on 50k won't be taxed at nearly the same rate as that from 50m. Therefore an expensive but "tax efficient" scheme based on expensive lawyer advice, not robots, is worth the money.
Actually, it will probably be taxed at a lower rate. Interest on a savings account is taxed as ordinary income, while investment income on a $50m portfolio will likely be taxed at the 15% (or perhaps 20%) capital gains rate.
There's no need to "structure" that. Buy stock and hold will do it.
One example is if you had $10m in real estate, infinitebank with loan you super low interest rate and then you invest it in a limited $200m fund which had some quasi-guaranteed rate. I can't remember the details but the risk was zero or low. Can't remember the fund name.
However, the advisor to the 50k person probably knows more than the advisor to the 50m person. The high networth advisor is even more of a salesman with no real knowledge.
But at the world's largest wealth management firms, 50m clients are not so encouraged. Wouldn't want to be a threat to the Managing Director or CEO.
I am just recounting what happened in a corner office with 2 Morgan executives who make about $1 million a year.
This is what they claim.
One of the main roles of a financial advisor, for people with $50MM or more, is to act as a relationship broker. They put very wealthy people in touch with other very wealthy people; e.g. "If you're going to be in Hawaii, you might want to look up X, who's doing some really interesting things in this sector..."
Brokering relationships is more than facilitating interesting conversations. It helps the FAs' clients build their businesses. For example, if you happen to be a venture capitalist who already made your first fortune, and you're looking to raise from LPs, then a financial advisor might introduce you to their other clients, such as Family Y, which lives off the rents created by their 19th-century match-book empire.
A lot of people don't realize that FAs are doing a lot more than running your numbers, and insofar as that's all they do, they will be replaced by robo-advisors.
Charging a percentage for assets under management creates an incentive to grow that pie, slowly but surely, keeping everybody happy.
Charging a flat or an hourly fee creates an incentive to "wham, bam, thank you mam, next customer please" type of interaction.
Such wealth management firm would have an issue surviving past year 1.
Completely false. With $50 million you have access to all sorts of investment vehicles that you don't have access to with $50K. Hedge funds for example. Also, with $50 million you have more worries - the bank won't insure $50 million cash, so you need to be invested in something, with the aim of wealth preservation while paying as few taxes as possible.
It's marketed as a platform that facilitates competition for the best trading algorithms but really, algos can be as complex or as simple as you want. A simple monthly portfolio rebalancer takes ~5 lines of code (handle_data is boilerplate required by the platform):
def initialize(context):
schedule_function(rebalance, date_rule=date_rules.month_end())
def rebalance(context, data):
order_target_percent(symbol('IVV'), .6)
order_target_percent(symbol('MUB'), .4)
def handle_data(context, data):
pass
It's all free as well.
Note: I have no ties to Quantopian, I just discovered them after being disappointed by how little flexibility Wealthfront and Betterment offered me.
I recommend using Interactive Brokers and coding your algorithm against their API directly, skipping the Quantopian middleman.
We would be crazy to charge people to use our platform. We need thousands of algorithms, and charging for the platform would be one of the faster ways to kill our business.
Yes, you can code to Interactive Broker's API. But where would you get your free minute historical data for backtesting? Or corporate fundamentals data? Or the free IPython research environment? Or the community of 60,000 quants giving each other mentoring and advice?
I work at Quantopian, so you can imagine my answer to all of those questions.
Is Quantopian free? Quantopian's community and backtester is free for everyone to use. There will be a charge for connecting your algorithm to your brokerage. Pricing isn't finalized, but we're considering a flat monthly fee.
If you care about tax efficiency -- which can severely deplete your on-paper returns -- then it's not really ~5 lines of code at all.
If you're looking for dumb-and-good-enough, delegating the fiddly rebalancing problem to someone with economies of scale isn't really so bad.
* you can offset unlimited gains with as many losses as you have - so that's the real value. * you can carry forward losses greater than 3000 to future years. so its not use it or lose it
Does it take into trading fees? I pay $9 per trade. Can you have fixed income instruments in your portfolio? Foreign stocks? Does it handle exchange rates? Does it account for dividends?
It only supports equities at the moment, with futures on the way. It only trades the US markets at the moment, exchange rates aren't relevant and dividends depends on how you want them "accounted for".
What you do with dividends also matters so ideally any algorithmic strategy you come up with takes that into account. For me not being in the US (Canada) currency exchange rate can at times dominate the returns.
There are a lot of newer ETF products on the market so it's going to be difficult to back test a strategy that uses ETFs.
At any rate, it looks interesting, I might play with it a little, but I don't think it works for me right now for investment purposes. I do my rebalancing yearly on a spreasdsheet :)
The more people forego seeking alpha the more of it that is available. So even if 50% of the market is passive, the pricing signals will all come from the 50% that's being actively managed.
I suspect the opposite is true: the market would be better if people invested in index funds rather than individual stocks when they didn't have any insight about the company. I don't have definitions to separate company "insight" from the more speculative information, but the distinction seems real enough.
Well, but index funds and individual stocks aren't the only things that retail investors can buy. A lot of money is moving out of actively-managed funds too.
- The unintended consequences of those new regulations introduced as a result of the GFC, which have largely removed the market making role of investment banks from global equity markets, has coincided with the recent massive increase in market share of both ‘dumb’ index funds and ‘black box’ algorithmic funds to create a situation where equity market volumes have fallen sharply and individual stock volatility has risen dramatically. An initially badly executed order can now inadvertently create a price trend (because there is no longer the cushion to price moves which was in the past provided by market maker inventories) that, as algorithmic funds feast on it, can create a market event even if the initial order was a simple innocent error. Truly – to mix metaphors – butterflies flapping their wings now regularly create hurricanes that stop out fundamentally driven investors who cannot remain solvent longer than the market can remain irrational.
- In such a world dominated by index and algorithmic funds historically logical correlations between different asset classes can remain in place long after they have ceased to be logical. More butterflies.
- Index and algorithmic fund manoeuvrings also make it very hard to ascertain what the markets ‘clean’ positioning is at any given time. All of which pushes up the cost of capital.
[0] http://www.zerohedge.com/news/2016-01-05/why-15-billion-nevs...
[1]http://www.wired.com/2016/01/the-rise-of-the-artificially-in...
This post observed all 3 of these general guidelines, and as a result, I got to learn about a very interesting project.
So particularly if you're relatively new to HN, and just got the downvote button, please let these posts stand as is, and don't downvote. HN isn't like many online communities in that moderate amounts of self-promotion are OK here.
I can see how it would be spammy, though considering that it's not a product available to people it wouldn't really benefit them in the same way as other products.
Either way, the relevance is that "robo-advisory" services will likely fall to AI systems sooner rather than later. That these "robo-systems" are taking off at all, means that people are comfortable handing over those decisions knowingly to machines. As they get better, it would be irresponsible to have a human managed fund - in the same way it will be irresponsible to get into a human driven car.
Similarly I expect there will always be people looking for ways to improve trading performance in the stock market, even if the strategies are automated and they're making optimization decisions multiple steps removed from the actual buy or sell decision. The nature of the job changes, but the goal remains the same.
But that's professional trading. The kind of trading needed for personal finance seems much less technical and could more easily be automated, since most people aren't looking to try out experimental stock trading strategies with their own money. If machine learning gets applied I think it would be more about understanding and communicating with the customer better.
Lying on the front page doesn't seem very promising, especially for someone you're giving your money to.
The foundation exists, what is/has been promised does not yet exist. If this group actually had an AGI, we'd be having an entirely different conversation (about the societal ramifications, mostly likely).
Many people define AGI as human level intelligence, and we're supposed to get there by 2020 or 2030 or so on when computers reach faster speeds.
http://www.nytimes.com/interactive/2011/01/02/business/20110...
* daily tax loss harvesting exists, so you can make more money if you are selling daily the funds that lost value so you don't have to pay taxes on the ones that gain value. Not sure how much this actually does, which is the main reason I'm not sure if robo advisors are worth it!
* keeping a balance between national low-cost index funds and international low-cost index funds is desirable so you can decrease volatility without decreasing expected returns. This is not all that hard to do on your own but it is an advantage of robo-advisors that you don't have to do it yourself.
The only advantages that I see in Robo advisors are that:
1) They reduce the human impact on the portfolio: If the stock market is crashing you want to regularly rebalance your bonds into stocks to keep your original target allocation. If you need to do this yourself manually there are probably lots of people who won't do this when the market is crashing.
2) You don't need to take care of TLH yourself. But then again TLH is pretty simple to do yourself.
However some disadvantages are:
1) Those Robo advisors are quite expensive. Wealthfront charges an annual rate of 0.25% on top of what the ETF charge themselves. So if you have a $500k portfolio you're paying $1250 per year to Wealthfront.
2) There's a lock-in: Wealthfront's feature to trade individual stocks instead of ETFs sounds nice, but it won't be easy to move these stocks somewhere else and to manage them yourself. And selling all of those stocks won't be an option either, if this incurs capital gains taxes.
The main issues that I can think of are wash sales and the task of finding other funds that match your original fund.
Unfortunately there aren't any roboadvisors (at least that I have found) that take your company 401k into account as well. I really want a roboadvisor that sits on top of all of my accounts (similar to mint), and either makes the trades for me, or emails me a list of trades to make (if the automation part is too hard to start).
(Side note: The target date funds have slightly higher expense ratios than just rolling your own with the same underlying funds and "Admiral" share classes.)
The question is, what is the value you're getting out of Betterment/Wealthfront? I don't recall where, but I've seen one or the other say that its estimated value-add was 0.7-1%. So less their fees, that's net positive (if you trust that).
Automated tax-loss harvesting is a big deal for workers. It saves you a little income tax at your marginal rate.
Automated rebalancing removes some of the annual work associated with maintaining your own portfolio (but so does a target-date fund).
At the end of the day, I'm not sure they're worth the fees... I still manage my own (simple index-fund portfolio). But they're pretty close to worth it.
So it's mostly a question of, do they do a good job of picking asset allocation from the start?
The problem is that data is hard to access, and sometimes you have to pay a company to get access to it. There is this Edgar system but it is mostly XML files and I don't know how to navigate it to find the right one. I'd need an API that lets me pick each stock and return the values I want to store in a database so I can do analysis on them to find the best debt to equity ratios. When a company has a lot of debt it is usually a sign that it will struggle in the future.
But yeah Robo-Advisers are very popular right now, and banks should be scared as it takes away chunks of their business. There used to be Excel spreadsheets that did Candle Stick charts and other stuff to find stocks to pick. Stuff like that got automated into AI routines.
Betterment and Wealthfront, would be the biggest players. WiseBanyan is interesting becuase there is not fee. Sigfig is interesting becuase it trades at your existing brokerages.