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Covestor Disrupts Wealth Management with New Multi-Managed Account

Retail investors replicate different models inside an MMA, with transparent access to their account.

However, there are restrictions on investors imposed by CVIM. As an investment advisor, CVIM has a suitability requirement, so clients are required to fill out a questionnaire about their appetite for risk before they invest. This generates a risk score, which determines which models are available to them. They can update their risk score, at anytime using the CV.IM console. Investors can also set certain restrictions on securities that need to be excluded. For instance, if a model holds Google stock and the investor works for Google, they can restrict trading in Google shares.

Although $10,000 is the minimum to participate, each strategy requires at least $5,000 to invest to ensure that the cash available to replicate the strategy. "You want to investor to have a reasonable match in proportion to the model's holdings. You don't want him sitting in cash," said Blacher. According to the firm's materials, the CVIM replication engine calculates the proportions in which a model should be followed, screening for trading restrictions and client exclusions and generates a series of orders. These orders are sent using an institutional order management system from Advent, to the investor's management account in near real time (between zero and three minutes).

Behind the scenes there's a lot of technology to provide transparency to investors on how the subscriptions are going, both what the investor owns and how much the investor made or lost. At the end of each day, CVIM confirms its trading records using the client's custodian records from their individual brokerage account at TD Ameritrade or IB. They can also view positions, transactions and receive monthly performance reports on the CV.IM console. "In the institutional world, there been a big cry for greater transparency and liquidity. Madoff could never have happened under this sort of model," says Blacher.

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

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