What digital wealth management can learn from successful online brokers with MyVest’s Charlie Haims

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Charlie Haims is Vice President of Marketing at MyVest.

What is MyVest?

Charlie Haims, MyVest
Charlie Haims, MyVest

MyVest is a pioneer in holistic wealth management technology for financial institutions.  Our enterprise software platform allows wealth management firms and their advisors to offer holistic, personalized, tax-aware portfolios at scale.  Advisors can only offer highly personalized portfolios like this to their best clients on a limited manual basis, but our platform allows advisors to offer best-practice portfolio management to all clients, large and small.

In the beginning, we worked with larger, traditional firms, but more recently, we’ve connected our sophistication in portfolio management to the rise of the digital wealth opportunity and now power one of the leading B2C digital wealth startups.  So, we can support all types of advisors serving the entire spectrum from mass market to high net-worth.  

What advantage does an advisor have armed with MyVest competing against the robos?

Compared to many robo-offerings, MyVest offers advisors more sophistication, and we offer their firms flexibility in scaling up these offerings across different types of advisors, client segments, and channels, while maintaining centralized control and oversight.

For advisors, they can offer every client a portfolio that is holistic, covering an entire household, personalized to each investor’s unique situation, and tax optimized.

For the firm, they get the flexibility to tailor different levels of control for different advisors based on their experience or their client base – from highly centralized home-office driven models and portfolios to advisor-managed ones, to hybrids in between.  The icing on this multi-layered cake is that we ensure every personalized portfolio is being managed per its investment policy statement on a daily basis, which is a big plus for trading, operations and compliance.

Imagine a bank that simultaneously serves mass market, mass affluent and high net worth segments with different wealth management offerings, investment vehicles, pricing, service models and advisor teams for each. Many banks use separate infrastructure for these different programs, but with MyVest, they can bridge these silos and do it all on a single, unified platform. Then we can help connect all of that configuration and sophistication to modern digital tools to help a traditional firm prepare for the future of wealth management.

Who are your customers? What are you hearing from them is their biggest challenge?

We address the needs of enterprise-level wealth management businesses at broker-dealers, RIAs, banks, and other service providers like custodians and turn-key asset management providers (TAMPs).

The biggest challenge we hear from customers is how they can transform their businesses from the old way of delivering wealth management to a new, client-centric approach.  These trends include the move from a product- to a client-centric mindset, from performance- to goals-based wealth management, from account-by-account to household-based management, the upcoming DOL fiduciary rule, demographic shifts, and new digital tools.

MyVest helps our customers with this kind of strategic transformation by being more than just a tactical product, but a long-term strategic partner.  We work like a consultant with our customers to design new offerings, bridge silos, simplify infrastructure, and prepare for the future.  The combination of our portfolio management sophistication and flexible platform I mentioned allows a firm to grow with us over time into a more scalable, profitable business that puts the client first in everything they do.

How do you think the whole excitement around robos plays out?

The good news with the excitement is that it jump-started a new level innovation in wealth management that had stagnated since the dot-com days and has driven more advisors and investors to adopt a more systematic approach to portfolio management.

Recent events demonstrate how this will play out where some startups are pivoting and incumbents are either launching their own, like Schwab and Vanguard, or acquiring, like BlackRock with FutureAdvisor and Northwestern Mutual with LearnVest.  I expect we’ll see a lot more retail brokerages and banks invest in digital wealth, plus we’ll see new players like asset managers attempting direct-to-retail distribution, custodians developing these services for independent advisors, and traditional advisors building or partnering to create their own offerings.

Retail client acquisition is expensive for any new offering given the brand and budgets of the incumbent retail investor firms and given history shows that investors stick with who they know and trust.  So I think the trick for new offerings to get critical mass in a crowded marketplace is through differentiation by carving out a unique niche in product, service or channel.  We’ve seen examples of this from startups that target investor niches, B2B advisor services, small business retirement advice, and many new financial planning and portfolio analysis initiatives.

In your career, you’ve personally been an integral part the industry’s move towards digital delivery of investment services beginning with the online brokers. What challenges did you face with them and do robos face similar/different challenges?

I was part of building one of the first online investing companies, DLJdirect, in the late 1990’s, and then at E*TRADE and Schwab.  The focus then was building the tools, data and education to help millions of new self-directed investors evaluate and trade individual securities.  As an industry, we accomplished a lot in giving consumers personal control over what was previously an offline investing world controlled by very expensive, opaque, inefficient intermediaries.

Back then, the industry’s key challenge was onboarding and educating a huge wave of brand new active investors overnight, and operations and customer service struggled to keep up with their diverse demands.  A related challenge was that many investors did not manage their portfolios in prudent ways over time (By the way, the ‘robos’ are addressing this second problem).

Today, there is again a big onboarding and educational challenge, but in a different way. Instead of a rush to keep up with a huge wave of newly minted active investors, the ‘robos’ big educational hurdle is to first persuade enough investors to adopt a new approach to investing, and then second to keep them engaged on a very long path towards achieving their goals, something traditional advisors do well but may be a challenge for the purely automated robos.

I also want to call out that this ‘robo’ thing is not new.  I knew some of the first automated advice launches in the late 1990’s, and like your recent interview with Peter Nesvold at Silver Lane who taught us how we could learn from the history of online banking, we can also learn directly from these early efforts.

Some of them succeeded by being:

  • initiatives of large diversified firms, like Amerivest from Ameritrade
  • acquired, like Sharebuilder by ING Direct
  • diversified into a broad platform, like Foliofn
  • backed by patient investors and finding a less competitive niche to maintain independence, like Financial Engines and GuidedChoice

Now, new innovation is building on these early examples.  But there is still a huge need to improve the financial outcomes for millions of American families, so there’s still a lot more work for all of us to do in making wealth management more client-centric.

Photo credit: The Nick Page via VisualHunt / CC BY

5 trends we’re watching this week

weekly trends in fintech

Every week at Tradestreaming, we’re tracking and analyzing the top trends impacting the finance industry. The following is a list of important things going on we think are worth paying attention to. For more in depth trendfollowing, subscribe to Tradestreaming’s weekly newsletter (published every Sunday).

1. What’s Goldman Sachs doing in online consumer lending? (Tradestreaming)
Tradestreaming Tearsheet: Watching fintech startups gain traction in lending and investing products, incumbent financial services giants like Goldman Sachs and Blackstone have decided to compete with the startups. Goldman Sachs has quietly been putting together a rather formidable offering in consumer lending. What’s the firm up to?

2. Financial Engines’ acquisition of The Mutual Fund Store a turning point in robo debate (InvestmentNews)
Tradestreaming Tearsheet: There’s ongoing discussion on whether online advisors can weather the client storm long term without real humans helping their clients. This deal is proof positive that online advice platforms may need human advisers to offer a full menu of financial planning services.

3. Bank of America working on own robo-advisor (Fortune)
Tradestreaming Tearsheet: Bank of America is joining the ever-increasing club of robo-advisors by building its own automated investment platform. Why partner with a robo-advisor like Betterment when you can just build one yourself and bring in billions a la Schwab?

4. Citi Creates Division Dedicated to Fintech (paymentweek)
Tradestreaming Tearsheet: Traditional banks are feeling pressured by all the new activity in lending/investing online (even if the startups are tiny relatively). New York banking giant Citi announced late last month that it would create a new division solely dedicated to financial technology.

5. The New Source of Innovation in Advisory Firms (ThinkAdvisor)
Tradestreaming Tearsheet: It’s getting harder and harder to grow an advisory firm. Here’s a hint: to succeed, it can’t just be the firm owner’s job.. Here are 7 steps to encourage employee engagement to get everyone in on the growth game. Growing an advisory business is definitely a team sport.

The Startups: Who’s shaking things up (Week ending November 7th, 2015)

fintech companies making news this week

[x_alert type=”success”]Every week, Tradestreaming highlights startups in the news, making things happen. The following is this week’s news roundup. You can get these updates delivered direct to your inbox by signing up for the Tradestreaming weekly newsletter.[/x_alert]

List of the top 10 roboadvisor CEOs (Tradestreaming)
Tradestreaming Tearsheet: Everyone’s talking @ #roboadvisors and automated investing platforms. Leading startups in the space have raised hundreds of millions of dollars in venture capital and are managing billions of dollars in AUM. But, who are the CEOs running these firms? Who are the people behind this whole industry? Here are 10 of the best.

What will be the most valuable fintech companies in 2020? (Disruptive Finance)
Tradestreaming Tearsheet: Who will be the most valuable Fintech companies of 2020? Here’s an (educated) guess. More importantly, will the largest Fintechs still be focused on niche areas or will they expand into other sectors (like the largest global financial services companies have done)?

Opening up access to new investors in litigation finance (Tradestreaming)
Tradestreaming Tearsheet: Online finance isn’t just making plain vanilla investing/lending more efficient and cheaper to the end users – it’s also opening up entirely new ways to invest and entirely new investable assets available to the average investor. Tradestreaming’s interview with Jay Greenberg of @lexshares – he’s opening up litigation finance to everyone. Can this be an asset class that eventually everyone holds in their retirement portfolios?

Interview with TransferWise’s Taavet Hinrikus and Kristo Kaarmann (Business Insider)
Tradestreaming Tearsheet: The international money transfer startup became one of London’s few ‘unicorns’ in January when Silicon Valley’s Andreessen Horowitz invested. “That makes us here think, ok, we’re probably also at a very special point in time where we’re seeing the birth of whatever number of new global financial services companies.”

Xignite Records 50 Billion Financial Data API Calls per Month (bobsguide)
Tradestreaming Tearsheet: Xignite announced that in July it served more than 50 billion API requests from its market data cloud platform, breaking all previous company records and making Xignite among the top API cloud providers in the world. As fintech enables further unbundling of data and services, Xignite and others in the space are riding the trend.

The fintech Silk Road – what we can learn from China (Jessica Ellerm)
Tradestreaming Tearsheet: “Banks often look at disruption in terms of product impact, in other words, how general FinTech (including distributed ledger technology, P2P lending, third-party payments, etc.) will disrupt. In reality, the biggest threats lie in the changing structure of global markets.”

Kickstarter surpasses $2 billion in pledges (The Verge)
Tradestreaming Tearsheet: Kickstarter announced that more than $2 billion has been pledged in total on the platform. It took the company nearly five years to hit the mark but revenue growth is ramping. Has crowdfunding become a standard way companies finance new products in our age?

Invoice2go gets $15M to compete more directly with Square and PayPal (VentureBeat)
Tradestreaming Tearsheet: Invoice2go has provided small businesses with one tool—a simple way to create an invoice and send it to clients. Now, with $15 million in new funding, the company is preparing to expand more deeply into the small business product territory. Square and PayPal should probably be paying attention.

Schwab’s roboadvisor assets increase 37% in 3rd quarter

Schwab Intelligent Portfolios seeing strong growth

With roboadvisors all over the news, one of the incumbent brokers is quietly chugging ahead with its own offering. In its recent earnings report [pdf], Schwab disclosed that its Schwab Intelligent Portfolios had grown its assets from $3 billion to $4.1 billion, a 37% jump in AUM quarter over quarter. That’s a big jump and a quick approbation from Schwab customers only a quarter in the business. Schwab’s strategy of launching a robo product appears to paying off.

Charles Schwab ($SCHW) launched its roboadvisor offering, Schwab Intelligent Portfolios, in March of 2015. SIP goes head-to-head with similar offering from Wealthfront and Betterment. One of the main differentiators noted when Schwab launched its robo product was its fee structure: Schwab Intelligent Portfolios don’t charge any advisory fees, commissions or account services fees. The algorithms behind SIP choose from an investment universe of 54 available exchange-traded funds (ETFs), including Schwab’s own in-house ETFs. This represents 20 different asset classes, including stocks, bonds, emerging markets, real estate investment trusts (REITs) and commodities.

If you look outside Schwab, SIP was received with some skepticism from the market. Some reviewers complained that the firm’s use of its own products (ETFs and cash), as well as overweighting the cash component of its allocation model, will actually drive up costs for investors using Intelligent Portfolios.

Schwab entering the roboadviosr race is a big deal, as it brings tremendous resources (both technological, marketing, and customer-wise). Both Betterment and Wealthfront quickly responded by explaining how their offerings we’re superior (see Betterment’s benchmark vs. Schwab and Wealthfront CEO Adam Nash’s “reflection” on Schwab’s launch and Schwab’s subsequent response).

Where’s the growth coming from?

It was a very volatile quarter for the markets — in fact, hedge funds saw their largest outflows since the financial crisis of 2008. While Schwab didn’t disclose how it grew its assets over the quarter, current Schwab investors would be the most appropriate marketing targets, as they have their money already custodied with Schwab and appreciate the brand. A simple call, email, or message on the Schwab website may resonate for a self-directed investor looking for more personalized (albeit, automated) advice.

How did Schwab Intelligent Portfolios perform?

As a public company, Schwab has certain regulatory responsibilities in terms of quarterly reporting. With its Intelligent Portfolios, the company has published a quarterly summary of the market’s performance during the period as well as a qualitative performance review of Schwab Intelligent Portfolios.

Declines in many asset classes resulted in negative portfolio returns across the risk spectrum for the quarter. As would be expected in this environment, more conservative portfolios benefited from their larger allocations to cash and bonds, while more aggressive portfolios saw bigger declines as a result of their higher allocations to stocks.

In even the most aggressive portfolios, however, allocations to defensive asset classes helped temper declines. Diversification provided by asset classes such as U.S. REITs also generated positive returns, helping offset declines in stocks.

There aren’t any real numbers here to make sense of the quarterly performance, so it’s hard to really tell how SIP investors fared during this tumultuous time. Since the S&P suffered its largest decline in 4 years (-6.44%), market returns didn’t power Schwab’s growth in AUM. Instead, organic growth of new investor capital drove Schwab’s 37% quarterly increase.

Simply invest like a hedge fund — with Mike Kane

andrew hallam

In the world of investing, there’s a lot of excitement around roboadvisors.

These automated and cheap investment platforms, like Wealthfront and Betterment, are attracting billions of dollars.

But, according to Mike Kane, there’s a big problem. Their investment strategies aren’t best of breed and investors will get hammered when markets go south. The CEO of Hedgeable joins Tradestreaming host, Zack Miller to talk about his roboadvisor that uses sophisticated tools — the like employed by hedge funds — to manage retail investor money.

Listen to the FULL episode

About Mike Kane

Hedgeable CEO, Mike KaneMike is the CEO of Hedgeable. He co-founded the company with his twin brother, Matt, and Mike oversees Hedgeable’s investing, strategy, business development, and branding initiatives.

Resources Mentioned In The Podcast

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