Financial firms continue to roll out robo plans and tweak automation-based investing options. As in the fund universe, all robos are not created equal.
In its third quarterly report, RIA Condor Capital – in cooperation with Backend Benchmarking – gives advisors and investors data that breaks down the performance of firms competing in this growing sector.
“Given the comparatively recent emergence of these algorithm- and automation-backed products, we think it is important to understand what their characteristics are in order to provide transparency for investors,” said Condor President Ken Schapiro, in a statement. “That’s why we think Condor Capital’s proprietary Robo Report is an innovative and go-to resource.”
Among firms announcing robo development in the latest quarter are TradeKing, Wells Fargo, Goldman Sachs and Betterment.
Motif said it is launching three proprietary portfolios, which it calls Impact Portfolios; they are managed at Motif’s discretion based on their risk assessment of users, like other robos, according to Condor Capital. “What sets them apart from most other offerings is they each have a socially responsible theme, allowing their clients to invest with a social purpose,” the group explained in its Q1 report.
TradeKing, now part of Ally Financial, is making a change in strategy that entails moving investors to Ally Invest Managed Portfolios. Investors most affected by the shift are those invested in the TradeKing’s Momentum strategy and portfolios with the Risk Assist feature. “They will transition from an active strategy employing technical analysis to what we anticipate will be a more passive strategy,” the latest Robo Report states.
Betterment said it is adding “live” advisors to individuals with $100,000 or more of invested assets. “This is a continuation of a trend we see from ‘pure’ robos with little to no human advice, to a ‘hybrid’ model where robo tools are combined with more traditional person-to-person interaction,” the report explained.
As for Wells Fargo, it is poised to roll out Intuitive Investor targeted at younger clients and prospects with an account minimum of $10,000 and a 0.50% management fee. It will be managed by SigFig (also working with UBS Americas), with the Wells Fargo Investment Institute handling its asset selection.
The industry buzz is that Goldman Sachs is working on its own robo-advice platform that could be aimed at mass affluent investors.
“We also hope to see an offering from Morgan Stanley later this year, although it is unclear whether their digital advice tools will be used to augment their existing advisors’ businesses, be marketed directly to consumers, or both,” the report said. “[CEO] Jamie Dimon also said in his yearly letter to shareholders that JPMorgan is developing a digital investment advice solution that should be ready this year.”
Moving against the grain, RBC Wealth Management said it was putting its robo plans in a holding pattern.
Here are the top robo advisors of Q1’17 and the past 12 months, as tracked by the Robo Report:
In Q1’17, funds benefited from “another very strong quarter for equities, while most fixed income showed slight gains despite rising interest rates,” the report notes.
While many trends from 2016 have reversed themselves, allocation decisions in equities had a significant impact. Overall, the returns on robo bond portfolios gained 1-2%.
“Drivers of equity performance in the robo portfolios included allocations to international equities, particularly emerging markets, weightings away from value and toward growth, and an emphasis on large- or mid-cap equities over small-cap,” the Condor RIA said.
Overall, fthe top three firms with the best-performing equity, fixed income and total portfolio returns for those with mixed-asset holdings are as follows.
- Equity only: SigFig, first; TD Ameritrade, second; and Vanguard, third;
- Fixed income: Schwab, SigFig and TradeKing Momentum;
- Portfolio: SigFig, TradeKing and TD Ameritrade
In general, returns for the first quarter ranged from 3.48% to 5.21% in taxable accounts and from 5.17% to 7.08% in IRA accounts.
“Once all was said and done, the relative outperformers in the 1st quarter among the taxable accounts were those that had higher allocations in international securities and low allocations in small cap securities,” according to the report.
Looking at returns in the past 12 months, performance ranged from about 8% to 12%.
(Not all of the large robo firms share data with Condor/Backend Benchmarking; Wealthfront, for instance, does not and hence is not included in the report and its accompanying charts.)