High Five! The top 5 fintech stories we’re following today

5 trends we're tracking in finance

[alert type=yellow ]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 newsletters .[/alert]

1. What’s the fuss about LendingClub?

The largest U.S. marketplace lender is in a whole lot of trouble. It’s unclear whether LendingClub’s current financial troubles are a result of the shady dealings of its (now ex-) CEO Renaud Laplanche or whether it’s a broader company issue. Either way, it’s a big deal. Here’s why.

2. How DailyWorth turned a newsletter into a roboadvisor for women

It’s a good time to be a woman investor. At DailyWorth, founder and CEO Amanda Steinberg is using the data amassed from her 7 year relationship with her 1 million newsletter subscribers to develop a roboadvisor to help women become smarter investors. DailyWorth’s wraparound roboadvisor service, which provides financial education, guidance, encouragement, and even some humor, is just one in a series of new fintech initiatives to empower women. To get your full girl power fix, read on about SHE: The ETF that trades on Female Empowerment, and Ellevest, Sallie Krawcheck’s new digital investment platform that wants to change how women manage their investment strategies.

3. Big banks stake fintech claims with patent application surge

Big banks are getting into the fintech frenzy by … filing patent applications.  The prominent financial institutions are firing off patent applications on technology that has already been integrated into existing products, speculative products, and up and coming key technologies. Just how many patents are we talking about? Since 2013, big banks have filed a whopping 2,679 patents (at least!) in hot areas such as blockchain, analytics and cybersecurity, a surge of 83% from the prior three years. These patents, when granted, would allow big banks to protect their innovation investments. However, this tactic comes with a price. Many of the technologies that big banks are trying to patent are network-effect technology; the more walls big banks erect, the less these technologies are able to grow.

4. How Charles Schwab fought back against roboadvisors

In June 2014, roboadvisors and the startups launching them were looming large on the investment horizon. Instead of hiding its head in the sand, Charles Schwab decided to embrace this new technology by creating its own roboadvisor service, Schwab Intelligence Portfolios, within the year. Here’s how Schwab did it. By using questionnaires to gauge clients’ investment goals, risk comfort, and a number of other factors, Schwab Intelligence Portfolios matches clients with investment portfolios tailored to their individual investment profile. However, according to Michael Kitces, Schwab may have to make some adjustments to the service fairly soon, in order to comply with the upcoming DoL fiduciary rule.

5. Why it’ll be Visa and MasterCard – not tech start-ups – that truly disrupt banking

Credit cards hardly seem disruptive – maybe because they’ve been around since the Roaring Twenties. Nevertheless, Alexander Vityaz argues (persuasively, we think) that credit card companies are already leading a quiet revolution in the finance industry. Thanks to their global, digitalized presence, Visa and MasterCard are slowly transforming into banking corporations, leaving banks acting like subsidiaries of the credit card companies. At the end of this process, Vityaz sees banks becoming faceless utility providers, much like your electric or gas company.

Photo credit: Loozrboy via Visual hunt / CC BY-SA

5 trends we’re tracking this week

5 trends in finance this week

[alert type=yellow ]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 newsletter .[/alert]

1. Edward Jones launches mutual fund family, attracts more money last year than Fidelity, BlackRock and American Funds (BizJournals)

2. Schwab ‘robo adviser’ grows to $5.3 billion in its debut year (Reuters)

3. Will the Department of Labor’s Fiduciary Rule make Broker-Dealers irrelevant in 2016? (Michael Kitces)

4. Fidelity drops credit card partners AmEx, Bank of America, ending 12 year partnership that generated billions in fees (Reuters)

5. The Wall Street Journal is first business publication to get a spot on Snapchat Discover (NiemanLab)

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.