Turning traditional money management on its head via tech (Future of investing)
This post was originally included as part of an ebook that I published alongside the launch of my book, Tradestream, entitled “Tradestreaming and the Future of Investing”. The content was so good I wanted everyone to have access to it.
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With the recent rise of social networks and the growth in internet use the landscape for Investment Management is changing rapidly. Today over forty million internet users in the US have access to much the same tools, research and transaction costs as the ‘professionals’. With the loss of trust in institutions engendered by the recent financial crisis, the ‘deinstitutionalization’ of money management has only accelerated.
Sites like Covestor offer access to a form on money management only previously available to those with millions of dollars available to invest. If you have enough money to open an account today with a wealth management firm, they will open a ”separately managed account” (SMA) or a “unified managed account” (UMA) in your name. These are accounts where professional investment managers trade on your behalf in your own account, so you get the benefit of paying for expert management with the safety and security of a managed account. Covestor offers this to any personal investor. But instead of the $500,000 minimum required to open a unified managed account, with just $10,000 you can access a world of great investors.
Technology and particularly the internet, stands to transform the industry. Much as it has in publishing, the barriers to entry have significantly lowered and the big names of the next wave look unlikely to be those of the last. Technology is allowing an explosion in choice, transparency and access. In an industry where the incumbents have become so large from holding on to exclusivity and opaqueness, they will doubtless fight to maintain their position but as always in the end the value will flow through to consumers.
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Perry Blacher is Co-Founder of Covestor and has over 10 years of experience in Strategy and Online Services. He started his career at McKinsey & Co before heading up business development at Microsoft MSN in Europe and later as a principal with Cash Capital Partners.