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New models of online investment advice and services- part 2 Print

3- Advice and customized actively managed fund

Another variety are entrants who help getting a financial plan, but also offer to assist in the subsequent investment phase. Nest Wise  is one example. Here is Grobart’s experience with Nest Wise.

This firm offers assistance in obtaining a financial plan, but also seems to offer subsequent investment advice for which the fees seem less clear. The firm works with outside advisers who have been pre-selected by the firm. A client can pick his adviser from the list. The selected adviser who will prepare a financial plan and an action plan (which seem designed to avoid picking individual stocks) based on a questionnaire which is used to assign a risk tolerance level for the client. Communications with the adviser are typically by email, although if a client’s your Advisor is located nearby, the client has the option of meeting in person. The typical fee seems to be $250 for the initial plan; if ongoing advice is desired a monthly fee of up to $48 is payable.  A NestWise Advisor can recommend an investment portfolio of Mutual Funds or Exchange Traded Funds (but not necessarily index funds) that reflects the client’s situation and risk profile, The web site refers to 28 distinct model portfolios from strategies developed by the NestWise Investment Team or outside strategists – some with minimums as low as $5,000. They are available for an additional fee of 1% of assets*

Here is a description by one investor of his experience in getting an initial financial plan from NestWise; Grobart  or doc.22xx- Grobart 2013 Financial Planners  Online.pdf).

I signed up with NestWise, which was founded by a Wharton professor. For $250, NestWise would match you to one of its 17 advisers. Your adviser would craft a detailed financial plan that you would execute. All we had to do was furnish the firm with our most up-to-date financial information and fill out a questionnaire to assess things like our tolerance for risk. ...The first step you take with NestWise is to fill out a “FactFinder”—an omnibus statement of your income, assets, and liabilities. .. The FactFinder goes to a living, breathing financial adviser, who crafts an assessment and action plan. My adviser, who works in Florida, was prompt, courteous, and professional. If I e-mailed him, I got a reply within 24 hours, and most often within just a couple of hours. I finished my FactFinder on Friday, Nov. 30. On Monday, Dec. 3, I received two documents from my adviser: a financial plan and an action plan. The 23-page financial plan included information like how much I’d be able to spend per month in retirement if I followed the plan’s suggestions ($15,273) and what I’d need to save each month to fully fund private out-of-state college for my two kids, aged six and two ($1,110).

The action plan was a series of steps we would need to take to meet the goals laid out in the financial plan. ....What I got from NestWise is a very straightforward, low-cost plan—both in terms of the cost to get it and the recommendations it makes. It avoids risky strategies like picking individual stocks but also recognizes we have a fairly long time horizon and we’re ready to weather some ups and downs in the market.

4- Online stock pickers

Some new entrants offer a stock-picking beat-the-market strategy, which our regular readers will know is not an approach we favor.

Consider Formula Investing who describe their approach as follows:

In 2005, Joel Greenblatt published a book that explains how he believes investors may outperform market averages by following his simple process of investing in good companies at bargain prices. Formula Investing is applying this methodology to manage its clients' portfolios.

The concept behind Formula Investing is simple. The idea is to systematically follow a strategy that seeks to buy above average companies but only when they can be purchased at below average prices. That's it. It is an investment strategy designed to be logical, disciplined, and cost effective.

Another example is Personal Capital They are another firm with its origins in the technology, not finance:

A longtime Silicon Valley veteran and a former chief executive officer of Intuit Inc. (INTU), Harris has quietly worked for two years on a startup called Personal Capital, raising $27 million. Harris said he hopes to create a new kind of financial-services firm catering to moderately wealthy individuals whose net worth, from several hundred thousand dollars to several million, is not quite fat enough to attract the high-priced investment advisers at Morgan Stanley (MS) or Goldman Sachs Group Inc. (GS) ……At the center of Harris’s plans is a free website,, that will help people track their finances and improve their portfolios.  Brad Stone or as a PDF doc.22xx- Stone Bloomberg 2011 Personal Capital Bets $27 Million It Can Upend Investment industry.pdf. See also Needleman  or as a PDF doc.22xx- Needleman CNET 2011 Personal Capital  Mint for rich people .pdf.

Their approach is also beating the market, as they explain:

We don’t look for home runs, but we’re not satisfied with the performance of traditional indexes like the S&P 500.

Active managers are always at risk of being accused of being closet indexers, in which event their fees are not competitive with someone who sets up his own portfolio with index ETF’s. New entrants are not immune from these charges. A user has written a comment questioning if in fact Personal Capital are not closet indexers,; see Jacob or as a PDF doc.22xx-Cash Cow Couple 2013   Personal Capital Review - The Good, The Bad, The Ugly.pdf .

Last Updated ( Saturday, 02 November 2013 )
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