UBS, Wealthfront Cancel $1.4B Deal
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thinkadvisor.com
It’s strange to me how people with such low assets would pay for a roboadvisor instead of just a fidelity or vanguard mutual fund. Even at a low price of 25 basis points per year that’s not very wise for the simple needs of low value portfolios.
I can understand if you have a lot and actually need some complicated management. But if you just have a few thousand then there’s no need.
It’s interesting and sad how it seems regular people get fleeced when they should just pay $500-1000 once to a fee only advisor and do their thing.
There are much worse decisions like not being invested at all.
For actual investments, I am basically bought into the "bogleheads" methodology. So, I don't think it's worth it to pay for an advisor.
BTW, Wealthfront minimum fee is 0.25% annually. I only say this because if you have more than 500$ in WF then your fee should be higher than $.11
I wouldnt want to pay a fee only advisor but this is actually cheaper than vanguard or fidelity until you get $2k or something.
https://www.wealthfront.com/pricing
If you want to save a few more bucks, you could check your portfolio every morning, invest in 100s of stocks manually, track wash sales and comparable stocks, then enter each trade into your tax software instead of just using the 1099 computations their computer does for you.
Or, maybe spend that time relaxing or being paid to do something more valuable. They charge $212 a month to manage a million dollar portfolio.
Assuming I could earn minimum wage doing something else, the lost wages from the time it would take me to do all that every weekday would be more than $212.
If you traded daily you would run into tracking error quickly as you ran out of similar funds to jump between for your tax loss harvest.
I think people get $1MM by avoiding $2500/year expenses. I plan on investing for 20-50 more years so saving $50-125k seems like a good exchange for an hour or so work every year.
You kind of have to review your holdings manually anyway as even if I had a personal advisor I would still check my own stuff.
- There can be diminishing returns with higher balances and over time, since one can ordinarily deduct a net of $3000 from income a year and carry forward further losses, so one may at some point be carrying forward losses every year and only deduct $3000 from income. However the fee would continue to grow proportional to the balance. It may make sense to reevaluate whether the service is still worth the fee once one has several years of losses to carry forward. - Depending on how much effort one wants to put in, one may be able to get much of the benefits of tax loss harvesting by doing it oneself. - One may have significant balances in tax advantaged accounts. If those are managed by Wealthfront, one may not be able to get the benefits of tax loss harvesting on those balances.
Robo-advisors probably also save a ton of time come tax season. I've never used the traditional ones but if you're doing the management yourself I imagine they don't automate it like the robo-advisors do...
Two issues: complexity of return and efficiency of turning pre-tax into post-tax income. Wealthfront is good at the former. It's half decent at the latter for moderate income levels. Above some threshold between $500k and $2mm, it's not the best.
Part of Wealthfront mission was to encourage younger people to save. They had a nice "savings tool" that you could play around with. Similarly how Robinhood got lot of people in to stock investing because the app was engaging and easy to use (for good or bad).
Fidely and Vanguard apps and websites are quite horrible to navigate and there are many more hoops to go through just to open an account and then you need to figure which funds to pick and how balance etc. With Wealthfront you just download the app on your phone, add some info, your bank account and set like that you want to invest like $250 twice a month and then forget about it.
I must admit myself that the focus over fees charged is not something, as new comers, you would look at priority. Especially as sales person in the sector would not put that out.
Is there a term for self-aware aversion to the Dunning-Krueger effect? Where one recognizes a task is outside their circle of competence, and so avoids making off-piste judgements in its respect?
I don’t believe Wealthfront actually supports this. If they did, I would use it.
They have you set targets for your cash account. Then any amount of money over that target gets invested into Wealthfront[0].
Vanguard does actually support this [1].
[0] https://support.wealthfront.com/hc/en-us/articles/3600451894...
[1] https://support.vanguard.com/tutorials/automatic-investments
I did find one that sold hourly consultations and she was really helpful at confirming my plan and that another situation I may have gotten myself into was not a good deal for me.
I say all of this because $500-1000 for a fee-only advisor is something I literally could not find. Additionally, advisors I researched have minimums in the hundreds of thousands range.
I ended up following bogleheads methodology and I think I'll be happy. It's still pretty new so no real data yet.
A separate advice session from a tax guy can be worthwhile but always remember that the tax guys work to minimize taxes, which isn't necessarily always the goal.
The bogleheads forum is great for general advice, even if you only read it: https://www.bogleheads.org
A fee based on AUM is an entirely standard way of paying a fee-only adviser.
ref. https://www.napfa.org/financial-planning/what-is-fee-only-ad...
Fee only takes an up front fee, sometimes fixed, sometimes hourly.
https://www.investopedia.com/articles/investing/102014/feeon...
>Generally, though, most agree, fee-only refers to payment from fixed, flat, hourly, or percentage-based fees.
Fee-only simply means they are paid an agreed on price from you and they don't get kickbacks, commissions, any type of reward for where you put your money. Fee-only fiduciaries will also have a link on their website to a PDF that very clearly describes the relationship and pricing.
There are hourly fees and AUM fees. I have only seen hourly fees apply for the creation of a financial plan. I did not see any offering in my area of someone managing a portfolio for less than 1% AUM.
The cost of a financial plan was quoted to me at least $6500, so not cheap.
I talked to a "normal" financial advisor as well—they get kickbacks. They tried to put me in super aggressive setups, life insurance, etc. It was not discussed upfront what their cuts are and it was very clear that it wasn't best for me. Be very very cautious if you ever go down this route.
Here's what NAPFA says, https://www.napfa.org/financial-planning/what-is-fee-only-ad...:
"Fee-Only financial advisors may be paid hourly, as a retainer, as a percentage of assets (AUM), or as a flat fee, depending upon the planner you choose."
What you are describing is advice-only not fee-only. That's what I want, an advice-only advisor. Good luck finding one. I can't.
I'm probably better off just taking the Series 65 myself for now to see what parts I don't know.
Wealthfront is new(ish) and technical. They probably have customers averaging less than 40 years old. People like that who have saved up $57k are likely to ultimately be much wealthier than the average American. If they won't need an advisor, who would?
There are fixed costs to wealth management. Traditionally, someone with less than ~$250k wouldn't be worth bespoke advice; practically, that limit is closer to $1 to 3mm. Wealthfront uses technology to reduce service costs, thereby bringing some of the perks of that upper tier of advice to folks with less money. It would be reductive, however, to expand that service offering to the PWM/MFMs of the world.
Index funds beat most other investment strategies in the longer term
Although they're putting a "positive" spin on it, surely this can't be good (for at least one party)?
For UBS, it is a decent percent of their profit.
https://www.macrotrends.net/stocks/charts/UBS/ubs-group-ag/n...
I wonder if this is the effect of a sort of acquisition equivalent to a 5% earnest money clause/agreement? 5% of $1.4bn is $70m.
That's 25X revenues. According to a fintech banker, I spoke to this past week those multiples are just not getting done anymore. As to how UBS was able to pull a Musk (in a much cleaner fashion), I'm not sure.