Robo Advisors

For many investors, the beginning of the year is a time for them to review their investing strategies and reassess their risk tolerance. Though the U.S. stock markets have been on an incredible run last year, recent polls of economists and American voters indicate great concern about a looming recession.

As you will see today, sometimes I get it really, badly, completely wrong. Thankfully, not too often.

Trump's decision to take out the Islamic Republic's most celebrated military leader, Qassem Soleimani, was a timely reminder that we face many problems. An armed conflict between the US and Iran is clearly one of them but far from the only one. Here is a list of the ones we worry mostly about, going into 2020.

Bob was in Mumbai last week to speak at the iFast conference to a group of approximately 150 independent advisors based in India. His talk covered the state of the digital-advice (“robo”) industry, based in part on research that has appeared in Advisor Perspectives.

A brainstorming session hosted by the CFP Board on December 13 offered a look at how the planning profession will evolve over the next 10 years. Here’s a view of the landscape in 2030 and what it will take to get there.

Did you know that more than $12 trillion in assets under management are engaged in one or more strategies of sustainable investment in the United States? This comprises more than 25 percent of the professional managed assets across the country and is a 38 percent growth from 2016 figures.

We don’t have much time to get our house in order, either in the US or globally. Everything I’ve said today applies, to various degrees, throughout the developed world. Thinking that 2% inflation or zero interest rates coupled with massive deficits will somehow help is beyond wishful thinking.

What can advisors do to be more transparent or communicate better?

Nearly every aspect of the advisory industry is undergoing some form of transformation today—spelling an opportunity for those advisors who are committed to continuously evolving their approach.

Should you be comfortable referring your clients to CPAs or other professionals who also handle annuities, investments and insurance?

RIA investment platforms – specifically the vehicles and tools they use to manage client portfolios – are about to undergo the most profound change in a generation. With the race to zero for trading stocks, mutual funds are becoming outdated. Customized portfolios of individual stocks will be the winner.

When the US and ultimately the rest of the Western world began to engage China, resulting in China finally being allowed into the World Trade Organization in the early 2000s, no one really expected the outcomes we see today. There is no simple disengagement path, given the scope of economic and legal entanglements. This isn’t a “trade” we can simply walk away from. But it is also one that, if allowed to continue in its current form, could lead to a loss of personal freedom for Western civilization. It really is that much of an existential question.

The evidence is overwhelming that automation has positively impacted total factor productivity (TFP) for years, i.e. GDP growth continues to benefit from the digital revolution despite the fact GDP growth is rather pedestrian these years.

The conventional wisdom around digital advice platforms – what are commonly referred to as “robo advisors” – is that they will commoditize the investment process, and push traditional, human advisors to justify the value they add – and, hence, justify their fees – with services other than investment management. So far, however, the performance results of those platforms have been unimpressive. What do those results bode for the future of digital advice?

In investing, tribalism is outright dangerous to your wealth. When you allow tribalism to impact your thinking, you lose the ability to think independently.

Neither my company nor I are long or short Tesla shares. Why don’t we own it?

Chris Davis is chairman of Davis Advisors, a firm founded by his father that has followed the same value-investing discipline for its 50-year history. In this interview, Chris discusses the exceptional opportunities he is finding among the financial stocks, how financial advisors can add the greatest value and the biggest changes he has seen over his career.

Early last week, the Chairman announced a new, as yet unnamed, Fed program through which the bank will now buy regular amounts of short-term U.S. government debt. Seeking to counter the rumblings that a new form of quantitative easing would be seen as an admission that the economy may be in trouble...

Several rumblings in the quarter raised concerns about an imminent market crash. Another distinctive possibility is that the bubble of "airy promises" and overly optimistic growth expectations is bursting.

Lon Erickson, CFA, is a portfolio manager and managing director for Thornburg Investment Management and oversees five of its fixed income mutual funds. Erickson says that rates could be as low as 1.1% in the next year, and he explains why a collaborative, bottom-up construction process will benefit advisors and their clients.

The press has been reporting on a trade spat between Japan and South Korea, ostensibly tied to South Korean anger over Japan’s behavior in the runup to World War II. The dispute is only the latest chapter in a long history of conflict between Korea and Japan.

When Carl Gugasian of Dewey, Cheatham & Howe rates Bianchi Corp. a “Strong Buy,” whose interest is that in? We dig into the conflict between WallStreet and You.

If the robos were pitted against a fifth grader, consisting of a 60/40 cap-weighted index portfolio, Jeff Foxworthy would easily give the victory to the 10-year old.

With interest rates on the 10-year US treasury bond having moved nearly 50bps higher over the last 10 days it is certainly worth asking the question if we’ve seen the low in interest rates or whether this is more of a correction in an ongoing downtrend in rates.

What fueled the rise in U.S. employment, and can we sustain it?

Rick Rieder highlights the economic policy state-of-play today, and where it may lead to should economic growth falter, productivity not materialize, and populism continue to thrive.

The fact that the equity markets are rallying in the face of this week’s negative “energy blast” is highly bullish.

For years, economists have disagreed whether ageing is inflationary or dis-inflationary. Ever since IMF published a controversial paper in 2015, the debate has raged, but I have finally concluded that ageing is most definitely dis-inflationary (and perhaps even outright deflationary), and here is why.

I work in the professional referral business. I spend a lot of time talking to advisors and investors who are seeking financial advice.

Economic uncertainty has spiked given the escalating U.S.-China trade war; with increasing risk it weakens the dividing line between the manufacturing and consumer sectors.

The saddest part is that the world trading system does, indeed, have serious problems, many of which emanate from China. We need to fix them. I fully support that goal. I am glad we have an administration that takes Chinese behavior seriously. But the tariff strategy is making the situation worse, not better, and the focus on trade deficits is entirely misplaced.

Every summer for the past several decades I have organized a series of Friday lunches in eastern Long Island for serious investors. More than 100 people attend the four sessions, with 25–30 at each one. The participants include hedge fund, private equity and real estate billionaires, venture capitalists, an academic and some corporate leaders.

Larry Kotlikoff will share some provocative ideas on what caused the Great Recession. As you’ll read, he demolishes the explanations Wall Street and Pennsylvania Avenue want us to believe. Instead, he argues that our financial system was built to fail, failed spectacularly, and was then rebuilt to die another day.

China’s currency depreciated this week, with the exchange rate rising to more than 7.0 renminbi per US dollar, unnerving investors worldwide. Here’s the good news: we don’t think the decline is as worrisome as it may seem.

There are good reasons to think we could once again see some fiat currencies disappear. If so, what “something else” will be money in the future?

It would be nice to have a more personal discussion with my clients and not just always talk about portfolio results.

I will share some general thoughts and observations about things I see, teach and understand about the challenges financial advisors face. Here are five themes to consider.

I want to share an impressive study on happiness. The ramifications of its findings are profound.

The decade of the 1990s in India was an era of rapid change. The sudden rise of new choices and shifts in consumer preferences was stunning, in hindsight.

This is the third in a series of posts focusing on the formula of advisor value. Here we discuss the cost of basic investment-only management—which is not only worthwhile, but necessary. Yet it should also be a warning sign if your value proposition is based solely on your investment management prowess.

Clearly there is an opportunity for advisors to leverage Batman’s uncanny ability to adapt and prepare.

Like Batman, investors cannot resort to superhuman powers when investing. Instead, knowledge, analytical skills and ingenuity are paramount for success. Asset allocation, diversification and risk management are essential dynamics to consider as volatility moves higher.

Stocks surged last Friday following a U.S. jobs report that, to put it mildly, fell far below expectations. At first, this might seem counterintuitive. Shouldn’t signs of a slowing economy act as a wet blanket on Wall Street?

The Northern Trust Economics team shares its outlook for U.S. economic growth, inflation, unemployment and interest rates.

Thirty years ago, troops descended upon Tiananmen Square to forcibly remove protestors who were agitating for democracy, an end to corruption and a more inclusive political system. Details remain unsettled, but hundreds of students were killed or injured.

Banks’ lending standards for C&I loans (typically to large businesses) tightened quite a bit in Q1, which bodes ill for both investment and overall economic growth going forward. Private investment and industrial production data seem to have confirmed the ongoing slowdown.

“Sell in May and go away” is, perhaps, our least favorite market cliché. It strikes us as simplistic and slightly juvenile. Except for the fact that it often proves true – the summer months do tend to exhibit less trading volume and, therefore (perhaps counterintuitively), the markets often react more violently to transitory news.

After my father, a Pearl Harbor survivor, died in 2011, we found a shoebox. It contained items that belonged to my Uncle Bill (my mother’s brother), who had also served in WWII. There was Bill’s birth certificate and baptism record, an address book, and some pages that looked like they were torn out of a diary.

Nasdaq President & CEO Adena Friedman talks candidly with Envestnet Head of Asset Manager Distribution about the future of financial advising, adding value for clients, work/life balance, and why Nasdaq isn’t just an exchange but a global technology company.

Ever since the growth of robo advisors began to accelerate nearly a decade ago, the dominant trend facing advisors has been the commoditization of investment advice. With the proliferation of high-quality, low-cost investment solutions, advisors have increasingly outsourced their investing, freeing up valuable resources to help clients in other ways. But that doesn’t mean that all outsourced solutions are created equal or that advisors cannot add value through the investment choices that are made on behalf of their clients. Here’s what advisors need to know when choosing an outsourcing solution.

Most investors and fellow citizens have no idea what water we are swimming in. They swim in a pool of agreed-upon, commonly understood narratives. And that’s all well and good until the water changes.

General George Custer met his doom charging into a battle he thought he could win, against an opponent he did not understand. Based on his views about the fast-emerging trade war with China, it looks to me that Donald Trump, is charging into an economic version of the Little Bighorn.

We believe that full portfolio control is more critical than ever in today’s investment landscape. Here’s why.

Stocks sold off this week on news of fresh U.S. tariffs on Chinese imports, and are now officially in oversold territory. Our proprietary sentiment indicator fell to 20 percent, showing that the market is at its most oversold since July 2018.

Global copper capacity could be short some 41,000 tons by as early as 2021, says one commodities research firm. Meaning: We could be looking at another commodities super-cycle, with the red metal leading the way.

What is the value of a financial advisor in 2019? We break down the full value of an advisor’s services in this easy-to-follow equation.

What keeps your wheels spinning, generating new ideas and creating new solutions? What drives you forward? What is your “why?”

It will soon be possible for guests at Marriott hotels in China to bypass lines at the registration desk and check in at a kiosk using facial recognition. Halfway across the globe, Marriott workers are going on strike, seeking higher wages and workplace safety. Artificial intelligence and robotics are at the heart of those highly promising but disruptive innovations. I am speaking today with someone whose index invests in robotics, automation and artificial intelligence companies that are at the heart of those trends.

At the moment there are only twelve countries and the EU which have space agencies with the proven capability to send satellites to outer space, of which NASA is the clear leader. All of whom subsist on Government funds and subsidies.

The “flight to passive” continues, with passively managed funds gaining $695 billion in inflows in 2018, versus $85 billion in net outflows from actively managed funds, according to Morningstar.

Although I consider the overall stock market as represented by the S&P 500 to be overvalued, not all stocks are overvalued.

Life expectancy has started to decline in some of the world's most prosperous countries, and there seems to be a powerful link between that and falling real wages. Come to think of it, there is even a link between austerity and falling life expectancy as the Greeks learned in 2010-2012.

The Expansion’s Endgame?; Latin America: Caught In The Middle; What The Yield Curve Is (And Isn’t) Telling Us

Sound investing requires linking the myriad mega-trends and world events we’re experience into a tapestry of potential outcomes. Key trends today include the growth of globalization, aging demographics, the acceleration and adoption of technological change, and the effect of these factors on the world populace.Exploring possible outcomes can serve as a directional checklist as the future unfolds.

ETFs have become a cornerstone of portfolio construction across the advisory industry. Over the last three decades, they have grown from zero to a $4 trillion market. My guest today is Ed Rosenberg, who will help us understand the key trends in the ETF market and what they mean for advisors.

It’s clear that with roboadvisors and automation, people expect more if they are paying you more. With investment management fees going to zero faster than the speed of light, financial planning is where it’s at.

In this article, we show returns of portfolios comprised of high-ESG scoring companies. More importantly, we use attribution analysis to show contributions from sector, industry and stock selection within these portfolios.

With the workforce starting to decline in many countries, we need brisk productivity growth for the economy to prosper, but exactly the opposite is happening. Why is that? In this month's Absolute Return Letter, we take a closer look at a number of negative productivity agents that hold back GDP growth.

A couple of weeks ago, I introduced you to an exciting new company called GoldSpot Discoveries,conceived and headed by mining visionary Denis Laviolette. GoldSpot is the world’s first exploration company to use artificial intelligence (AI) and machine learning in the discovery process for precious metals and other natural resources.

We have a light economic calendar and a short week. We’ll get earnings reports from another 10% of S&P 500 companies. With plenty of time and little fresh information, I expect plenty of pure speculation about the state of the market.

The most popular missives we write are associated with Warren Buffett’s annual letter to shareholders and the annual shareholder meeting in Omaha. This year we thought it would be fun to channel Mr. Buffett and attempt to write his letter for him.

Modern Monetary Theory is a revival of an early 1900s idea called chartalism.

British Prime Minister Theresa May’s strategy of threatening a no-deal Brexit requires a hard deadline that forces her opponents to capitulate. Without that, “running down the clock” becomes “kicking the can down the road,” which more accurately reflects May’s paradoxical combination of robotic inflexibility and exasperating indecisiveness.

Robo advisors suffer from a common flaw, according to Zvi Bodie. They don’t use a “safety first” methodology and are exposing users to unnecessary risks.

The purpose of this memo is to describe what happens when political behavior collides with economic reality, as illustrated in one area where the government is taking steps – tariffs – and another in which debate among politicians is heating up – restrictions on the capitalist system.