If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at http://www.rwinvestmentstrategies.com. If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.
Saturday, April 12, 2014
With the advent of the 401(k) and the consequent demise of pension funds, individuals have had to take on the task of managing their assets. As a result, an industry arose that charges upwards of 1% to put you into mutual funds charging in excess of 1% and even garnering commissions in many cases on top of that. They will do this in your 401(k)s and then in your IRA rolled over from your 401(k). Sadly, the bottom line has been, not surprisingly, poor. After fees, research has long shown that 8 out of 10 professional managers underperform the market over longer periods. This is part of the reason that a retirement crisis looms.
Robo-advisors, on the other hand, advise for a low fee so that picking funds, rebalancing, and withdrawing appropriately are broken down in easy-to-follow steps. IMHO, this still isn't the best approach. That would be to teach these fundamental principles of low-cost, well-diversified asset allocation based investing in public schools. Today, instead, if school systems teach anything about investing it is via stock market games which, in turn, is a step in the wrong direction. Still, for many people today, a robo-advisor could be a good approach.
Don't get me wrong - if you think you are Warren Buffett and want to take the risk of investing in individual stocks for higher performance ,be my guest: in fact, I actively promote it for some clients with up to 10% of their assets. FOR MOST PEOPLE, THOUGH, JUST INVESTING AUTOMATICALLY (VIA A 401(K) OR SIMILAR VEHICLE) WILL PUT THEM ON AN INVESTMENT PATH THAT WILL LEAD TO A SECURE RETIREMENT.
I have to say that I am always a bit leery of people who come to the party late. In that vein, I am looking with a jaundiced eye at the movement in the Financial Planning industry to lower investment management fees in response to the robo-advisor trend. It is reminiscent of brokers lowering the fees on mutual funds in response to the low fees of exchange traded funds.
In any event, here is the best article I have seen on robo-advisors and the services they offer:
"Financial Advice for People Who Aren't Rich" by Ron Lieber, New York Times
Towards the end of the article, you'll find a useful table comparing the various services.