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You might be a robo-advisor if …

  • You boast of your platform’s use of sophisticated artificial intelligence (AI) to produce customized guidance, but send your customers emails that read, “Dear XYZ Revocable Trust u/a/d 1-1-2010,”
  • You think that you invented dividend reinvestment and are so proud of this accomplishment that you feel compelled to send a self-congratulatory email to your customers every time an ETF in your portfolio model pays a dividend
  • Your woefully inexperienced human support staff routinely gives dangerously bad advice regarding IRA and qualified plan rules
  • Your platform boasts of its ability to process incoming asset transfers at lightning speed, but takes weeks to process outgoing transfers and exhibits a pattern of losing and/or not processing signed ACAT documents
  • You preach the gospel of passive index investing, but trade your AI brains out actively managing an underlying portfolio of Index ETFs
  • You promote your ability to produce alpha through tax-managed trading to a client with an IRA
  • You are scathing in your criticism of a competitor’s “smart-beta” ETFs and preach to all who will listen that “smart beta is stupid”…only to roll out your own smart-beta strategy less than a year later.
  • You panic and freeze client accounts due to “extraordinary volatility” on a day when the market drops just 3%
  • You think it is okay to prevent clients from liquidating their accounts by hiding behind a clause on page 38 of your book-length disclosure document
  • You don’t get that preventing an account holder from liquidating to “protect their interests” may also be a euphemism for avoiding the uncomfortable possibility of having to report net outflows to venture capital (VC) investors (Conflict of interest anyone?)
  • You boast of having ultra-low fees, but fail to acknowledge that investors can purchase the exact same ETFs and/or index funds in your portfolio models without having to pay any additional fee
  • You proclaim how AI may one day replace the financial advisor, but then have to scramble to build a hybrid advice model because investors are flocking to platforms that offer real, live planning advice
  • You announce that you have a bunch of $10,000,000 accounts who have bought into your new 0.5% hybrid advice model without realizing that you are shouting to the world that you are now charging those clients $50,000+ (!) per year in AUM fees
  • You suckered a bunch of big name VCs into pouring hundreds of millions of dollars into your hip algorithmic trading platform with a slick user experience that has 0% chance of ever achieving the scale necessary to be profitable based on your original 15-25 basis point platform pricing
  • You are trying a little too hard to convince the world that your automated trading platform really is succeeding beyond your wildest expectations while you are squirming over decelerating growth rates and burning through cash like it was doused in gasoline

By J.R. Robinson, read the full article here.