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March 18, 2015 at 10:47 AM
Another barrier separating human advisors and the robotic rivals on their tail was breached with the announcement Wednesday that automated investment manager SigFig is offering free portfolio analysis and recommendations.
The vaunted second opinion has long been a staple of advisor competition, but having a robo advisor perform the analysis, flag potential problems and suggest alternatives may alleviate feelings of obligation that would keep reluctant consumers from trying out the service.
What’s more, investors attracted to cheaper robo offerings normally have to take the steps of transferring their funds and creating a new account.
SigFig, in a release announcing the new service, says its free service signifies a focus on helping investors optimize existing accounts, both in the taxable and retirement domains.
And if SigFig’s 3-minute analysis uncovers the huge portfolio inefficiencies it believes it will find, investors are free to sign up for the firm’s low-cost wealth management services.
The San Francisco-based registered investment advisor, which got its start as data publisher WikiInvest, figures that between its algorithmic data engine, its de minimus asset management fees and the low-cost ETFs it would propose using, it’s going to uncover savings opportunities of significance.
Indeed, the data-driven company — whose technology is used on the financial portals offered by AOL, Forbes and USA Today — has released a survey timed to coincide with its free-analysis offering, showing that 90% of investors make easily correctible mistakes.
And the costs of those mistakes are steep: Last year, when the S&P 500 returned 13.6% and a more conservative, balanced portfolio generated a 10.6% return, the median investor earned just 4.2%, and fully a third of the investors in SigFig’s survey ended the year with zero or negative returns.
The robo firm’s research, based on $350 billion in tracked assets, finds that 60% of investors pay too much in fees; 27% endure costly cash drag; and 60% are overconcentrated in a single stock.
