The push to offer online advisory services has been gaining momentum as investors turn to technology for advice. Last week, TradeKing, an innovator in online brokerage, said it had formed TradeKing Advisors, Inc., an SEC-registered investment adviser providing professional managed investment portfolio online with affordable fees.
A number of personal investing startups such as Betterment, Motif, Personal Capital, Sig Fig, and Wealthfront have reportedly raised $200 million from venture capitalists on the basis of competing with Wall Street through easy-to-use tools and low fees. Investors pay a fee to these firms and then the computers takeover -- although not everyone is comfortable, notes an article in USA Today.
Injecting the human element, TradeKing will offer advisory services with portfolios designed and monitored by Ibbotson Associates, Inc., a registered investment adviser and part of Morningstar’s Investment Management group. The firm will actively manage and rebalance client accounts as needed to keep the portfolios in line with Ibbotson’s target allocations. Richard Hagen Jr., TradeKing’s co-founder, longtime president, and COO, will assume the role of president and CEO of TradeKing Advisors, which plans to launch its service this summer.
Unlike the so-called robo-advisors, TradeKing doesn’t use algorithms to construct the portfolio. “We’re really blending our brokerage and service expertise with our technology expertise and then partnering with human beings at Morningstar’s Ibbotson to be the portfolio managers,” he says.
Investors who come to TradeKing Advisor's site will answer eight questions online, including six that are risk-based and two that are related to investment time horizon, explains Hagen. Then they will receive one or two recommended portfolios that have been constructed by the professional human beings at Ibbotson, he says.
Ibbotson will create the recommended model portfolios from exchange-traded funds (ETFs), for their low-cost nature and for diversification, he says. Each portfolio has between 14 and 20 ETFs covering a broad range of sectors, depending on which portfolio and risk-level the investor is in. Then investors will set up an account online.
Ibbotson has been in the business for 30 years, providing these services for independent money managers, and now it will be partnering with TradeKing to hit the retail market. TradeKing is handling all of the technology and the account opening. It is bringing all the expertise to service clients gained over the past eight years in business, he notes.
Moving into providing online advisory services is a shift for TradeKing, whose focus has been self-directed brokerage and online trading. “Over the years we see a lot of people who are successful managing their own investments and their accounts. That said, we do see many people who struggle, and they’re falling behind in reaching their investment goals and need a lot of help,” says Hagen. Why is that? “Either people lack the time and expertise to successfully navigate the markets, which have been volatile over the last few years. Or, consumers are starved for objective advice. Another issue is that high-quality portfolio advisory services have been costly -- 1.5% to 2% of total assets under management. There’s a whole segment that is tossed to the curb and needs help,” he says.
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio