At over 100 pages, it’s a really in-depth look at the confluence of trends affecting the industry (brokers, financial planners and RIAs) and a critical look at where Veres thinks the market, business, and profession are headed.
The advisory firm of the future is undergoing a metamorphosis unlike anything that has been experienced in the 40-year history of the profession. This is not surprising, for there are more drivers and trends buffeting the financial services world than ever before: the aging and impending transition issues facing the founding generation of advisors; the market meltdown and business crisis faced by the profession; the advent of new software tools and an emerging dynamic that favors the development of a closer relationship between
custodians/broker-dealers and RIA firms; the democratization of practice management advice and information; the emergence and widespread adoption of new client services; the emergence of viable business models to address middle-market clients; the market trauma leading to a reexamination of how portfolios are created and tended.
Veres’s core thesis is:
not a narrow window of opportunity: there is a big opportunity for investment advisors to grow their businesses in the sea-change.
evolving from practice to business: practice management becomes more core as advisors focus more on profits and roll-up of advisory practices gains steam.
old models going away: Old-school brokerage business is in steep, terminal decline. Fiduciary is the future. This means that mid-market, less wealthy clients can seek service and receive it.
technology-enabled new business models: Technology is helping close the distance between custodians/broker-dealers and investment advisory firms as well as creating new business opportunities on different client sets.
All these trends seem to mutually enforce one another and there was a lot of thought and energy put into the report. Check it out.
This is part one of a series that takes a birds-eye view into the concepts I develop in my book, Tradestreaming. Readers should also subscribe to my newsletter to stay on top of all news, posts and share in some of the ideas I’ll be developing. Subscribe here.
The Problem: Too much info
Does your head spin with the vast amount of financial information on the Internet?
Are you bombarded with numerous talking heads, each one purporting to have developed a better system, a better mousetrap, for investors and their long term performance?
With the reams of data and discussion on the Internet and 24/7 cable channels talking about the markets and every move upward or downward, it’s become almost impossible for an investor to find his way. Every get rich schemer plays into this frustration with promises of quick profits and little risk.
Tradestreaming: A Better Way
Tradestreaming is all about using the Internet (and in particular, social media sites like Twitter) to make better, more accurate — more informed — investment decisions.
Let’s face it: most investors struggle to beat the markets. We make great stock picks but we also buy losers and don’t sell them soon enough. The research shows that individuals (and many professionals) struggle to keep up with (let alone, beat) the stock market. That’s a fact.
By plugging into the massive amount of profitable information online — the collective Tradestream – investors can piggyback on the successes of others and their time-tested strategies to build better portfolios for the long term.
I see Wikinvest as the next generation financial portal best positioned to take on Yahoo Finance with expanded charting, news, opinion, and data.
But I’m puzzled by the new launch of the Wikinvest Portfolio. Not that I don’t think it’s a good product. After giving Wikinvest your brokerage credentials the site quickly populates a portfolio that brings in all real-time pricing (so you get performance metrics), charting and news, but also allows more flexibility than traditional online portfolios in terms of researching and structuring/ordering the portfolio.
Personal finance portfolios are everywhere — offered even by media sites like Thomson Reuters, Bloomberg and the Wall Street Journal. But generally speaking they have limited functionality, are difficult to set-up and need manual updating whenever something changes in one of your accounts.
Wikinvest reduces the friction of creation and maintenance by creating an onramp which seems ridiculously simple.
It’s this onramp — made easy by linking up a brokerage account to Wikinvest — which makes me scratch my head. It’s not that I don’t think financial sites can ask for login info: Cake Financial (bought by E*Trade) and Mint (bought by Intuit) both proved that in return for something valuable, users will give up their most trusted of details.
But that’s the rub for me. It’s unclear as a user what value I get in giving up my private information. The value proposition of this portfolio — how it betters from just manually creating one on another site or using my brokers portfolio (which also has some aggregation functionality) — isn’t compelling. Wikinvest needs to do a better job explaining what I get in return for trusting them with my data. I don’t feel they’ve done that.
Maybe it’s just me, though: Wikinvest was quoted in the same Wired article referenced above as having had over $100 million in client portfolios linked within 6 hours of launch. That’s not too shabby.
Where Wikinvest appears headed
For me, what this looks like, is that Wikinvest is positioning itself to take over where Cake Financial left off and will probably begin to offer value-added services tied to users’ portfolios. Some of these were mentioned in the NY Times article about the portfolio launch:
3rd party monitoring of financial planners/investment advisors
Sharing of investment ideas across Wikinvest user base
even entry into Covestor/kaChing space with an ability for users to invest in other users’ portfolios
At Long Last: Real Time Portfolio Tracking, Courtesy of Wikinvest (Wired)
Wikinvest Introduces Tool to Track Investments (NY Times)
Wikinvest Introduces a Portfolio Tracker Linked to All Your Brokerage Accounts (TechCrunch)
Wkinvest tracks your stock portfolio in real time (VentureBeat)
===>>> IMPORTANT NOTE: please check out Tradestreaming.com — the site for my new book (launching soon). Please sign up via email and/or RSS to stay plugged in to this conversation. I’m going to begin migrating my blogging activities to that site as time unfurls (or furls, means the same). So it’s definitely important we stay in touch.
I had a really interesting conversation today with a really smart entrepreneur (more on him in a later post) and it just got me thinking how retail investors make investment decisions. I guess if you had to break down the process of decision making in pulling the buy/sell trigger, we make our investment decisions in the following ways:
Simple screening: Like Yahoo Finance’s stock screener, these tools allow us to search for both basic and more advanced parameters/criteria to filter out candidates completely from the investment universe (in fact, they’re banished, never to be heard from again, until we conduct another screen). Some quantitative investors rely solely upon the output of these filters (see Joel Greenblatt’s Magic Formula). Charting falls under this umbrella, too.
Pros: Allows investors to sort through mounds of data to extract value
Cons: Once screened out, stocks that don’t fit the criteria are forgotten about and stocks that make the grade are never compared to these by-products.
Lateral recommendations: Like Amazon’s “people who bought X also bought Y”, here investors are using research tools like Morningstar to pivot around a particular investment of choice to broaden their research to find something similar, but maybe better performing/less risky. I see this a lot in the interpersonal interaction on message boards where one know-it-all tells everyone “If you like this stock, why don’t you check out this stock.” The point here is that there is a frame of reference and new research takes off from there.
Pros: Unlike buying a new phone, where a customer can describe accurately what he wants (“I want the iPhone”), many investors lack the language to describe what it is they are actually seeking in an investment and what tradeoffs they may incur in making such a decision (risk/return). Lateral recs allow investors to make decisions by saying something to the effect: I want something like that.
Cons: Lateral recommendations are frequently compiled by using website activity and purchasing data and then working backwards to create a personalized rec. The truth is, though, there is nothing personal about this suggestion. It’s just data. In fact, it can stray pretty far away from what a user really wants.
Piggyback investing: Investors buy things based on weighted opinions from others. These recommendations can come from an article in Forbes to actually hard-core piggybacking hedge fund picks like the guys at AlphaClone are helping investors do.
Pros: Taken as individual suggestions, many of these picks do fine in terms of future performance. In fact, building an entire portfolio of ideas like this and creating a portfolio of them grounded in historical performance can act as an investment strategy that’s as good as any out there. This takes much of the decision making out of the hands of the investor — he merely needs to decide which guru to follow.
Cons: Piggyback output lacks any personalized context. Because John Paulson is buying gold doesn’t mean that Ida and Murry should be buying it for their retirement portfolios.
I’m sure there are many other ways I’ve missed but these seem to be the way most investors I’ve been in contact make decisions to invest or pass on opportunities. In fact, decisions aren’t made via only one route like I’ve listed above — it’s probably a hodgepodge of ways. Each one of these directions has problems associated with them and when technology is used to help solve these problems, new issues arise that have to do with the structure of the software thrown at the problem.
Please join me in asking WHY YAHOO FINANCE HASN”T REALLY CHANGED IN 10 YEARS?! C’mon — with all the smart people we’ve got in the industry, investors deserve more.
When was the last time you looked at a financial product (and no, you can’t include CDS or RMBS in this question) and were wowed. It’s been awhile for me (I don’t get out much).
Well, it got me thinking. Earlier this week I went into a restroom and was surprised to find — not the usual hand drier — but something that really piqued my interest. It was a totally new design, completed drying my hands in 7 seconds, and created no waste. I’m so used to the old-school, rusty metallic versions that take forever to complete their only task (I’d be interested to see the pre-dry abandonment rate for traditional hand-driers).
It was interesting enough that it got me thinking how little influential innovation has happened in the finance industry over the past few years. I’ve got 714 ETFs to invest in U.S. large cap stocks. Great.
Check out the video below — it’s in Hebrew (the product is Israeli) and the product’s website.
Tradestreaming is a community of investors learning directly from experts. I’m Zack Miller, investor, entrepreneur, and founder of Tradestreaming.com and I literally wrote the book on how to invest in the age of Facebook and Twitter. Tradestreaming is the resource I’ve created to help me become a better investor. I believe it will help you … Continue Reading
Tradestreaming is all about using technology tools, social media, and strategies to become better -- more accurate -- investors. Zack Miller is the author of Tradestream your Way to Profits: Building a Killer Portfolio in the Age of Social Media (Wiley, 2010).