We Interrupt This Program To Bring You. I had asked him directly why Wealthfront didn’t publish a question I had asked regarding something I thought was contradictory in. I gave him a tough time on Twitter about it, because it seemed to me that Wealthfront maybe only wants to post and answer questions publicly that serve their narrative. For what it’s worth, here are the two posts I was bringing to his/their/your attention: Passive Investors Need Less Handholding and The Right and Wrong Reasons to Change Your Risk Tolerance. One post claims their clients are smarter than the average bear and therefore they “don’t need” handholding, but the other says well. But, that’s something maybe I’ll tackle later. So, Schwab launches a robo advisor. Wealthfront pays attention and launches a messaging counter- attack. Is anyone really surprised yet? No. What’s at the heart of Adam’s post is this: Schwab has lost its way by saying their robo- service is. But it is free, sort of. The very publicly disclosed truth is, you are paying Schwab for the funds they manage, which are all pretty darn cheap, and are actually some of the same funds Wealthfront uses for their service (that’s right, Wealthfront uses Schwab funds). What isn’t lost on me is that many (but not all) of Schwab’s funds are actually cheaper than the other funds Wealthfront is using within their portfolios? To keep this apples- to- apples, Schwab is not charging an “advisory fee” & Wealthfront is — . That’s that. Schwab is marketing the free angle though, and I’m not saying it’s smart marketing to use “free”. Venkat Tirumala Eddie Cervantes AP US History Per. 2 Scott 4/11/12 NEWS FLASH. Newsflash Cartoons and Comics. Newsflash cartoon 1 of 9. We Interrupt This Program to Bring You Your Kevin Bacon. I actually think it’s really dumb. So, you don’t value anything about it all?? Millennials hate this stuff. I even saw a baby nursing. Right out. So, not only do millennials and nursing babies hate it. Especially about free. Fair enough. The truth is Adam Nash was smart though, to play it the way he did — he didn’t stop there, he. And somehow because he put it on his personal blog, it was so personal — CEO to CEO — just Adam and Chuck Schwab, mano y mano. Then I read Adam’s missive some more, and some things bothered me: 1) Adam makes it personal somehow by putting it on his personal blog, and that’s fine. Passion aside, this is business; and your business to to make your business look good. And that’s what this post was about, plain and simple. Nash calls out Schwab for their “hidden revenue line” because they use cash in their portfolios, and realize revenue. We Interrupt This Broadcast is. The phrase 'we interrupt this broadcast' has been used frequently by radio and television networks when breaking into a program in. We Interrupt This Program To Bring You A Newsflash MerriamWe Interrupt This Program To Bring You. Nash found the data? Then Mr. Nash compared Schwab’s interest rate paid to customers vs. Aside from that being not fair, that’s almost completely intellectually dishonest, because Mr. Nash must know that Schwab has a nationwide network of physical branches (that cost real money to run)? No, THEY ARE INTERNET BANKS. People use Charles Schwab and internet banks for different reasons, and they have different expectations and needs. Go to your internet bank at 3: 4. Friday and see how quickly you get a check issued to take with you somewhere. But that doesn’t fit the narrative, does it? And Schwab very clearly acknowledges the potential conflict of interest with them using cash as a placeholder in their asset allocation in their client disclosure brochure. In most of the investment strategies, this results in a Sweep Allocation which is higher than the cash allocation would be in a similar strategy in a managed account program sponsored by a Schwab entity or third parties. A higher cash allocation can negatively impact performance for an investment strategy in a rising market. A conflict they openly acknowledge. And yes, in a rising market this could negatively impact performance. It’s in their disclosure. And it also assumes in a rising market, but markets (stocks, bonds, real estate)? And meanwhile, over on the Bogleheads Forum, people are very publicly asking why their portfolio at Wealthfront only returned 2% in 2. But just because Schwab makes money on cash, that doesn’t mean they’re not making the right call by having cash as a position within the portfolio. They even describe it as . What the analyst wrote, and ASSUMED, was this. What the analyst is really illustrating is simply how mental masturbation works. As convenient as that approach is. What would’ve been better, and added real value to this conversation, would have been to actually backtest the proposed mixes at each of the firms, and really see what the difference in performance and fees would be. But Wealthfront didn’t do that, and they didn’t find and highlight an analyst who did either. Maybe it doesn’t fit their narrative. You’d have to ask them. More on Wealthfront’s assumptions about that cash: Schwab is holding it and Wealthfront then assumes your portfolio is going to suck as a result — at least that’s the narrative I think that is being formed by Wealthfront — in the form of some sort of inevitable opportunity cost. That bothers me most is Wealthfront’s approach to illustrating? I think it’s called an “advertorial”. But, again, I digress. They assume that someone with a 4. Schwab would possibly be better off with Wealthfront to the tune of over $5. Schwab. They also illustrate the more likely 6% allocation a 2. The 2. 5- year- old will likely make over $5. Isn’t that how you read it, too? Maybe not, maybe I’m odd. But if you did read it that way, like me. That’s total bullshit — and lame — and sloppy. That’s also probably not true. And maybe Schwab’s allocation will be better over the next 4. But that’s unknowable — and it’s also totally disingenuous for Mr. Nash and Wealthfront to try to make their point that way. I’m not saying it can’t work like that, it just doesn’t. Maybe, but it hasn’t happened yet. Yet it does make for a powerful (not advertising) chart though, doesn’t it? The reality is maybe your number will be higher or lower in real life, but markets simply don’t compound at x% a year. And maybe Wealthfront will still come out on top, and maybe not. But to do it the way Wealthfront shows is just not the way a real analysis should happen. Instead, what I see happening is just kind of lazy, or worse. Now I could take the time to do this Monte Carlo simulation, but this isn’t my fight. But let me just say this. And while you’re at it, tell me where Schwab’s site highlights or markets “Smart Beta.”. To keep it in perspective, i. Shares, one of the largest index fund provider’s in the world, has an. And it costs . 6. And maybe that i. Shares fund is one Wealthfront will use, or has used, and maybe they won’t maybe they’re using i. Shares other emerging market fund which is cheaper — my point is, we’re not talking about highway robbery here either way. And on the point of ETFs “paying Schwab”. Let’s play the same game with Wealthfront. Is there anything nefarious there? I’m not saying there is, but to go around raising these broad questions about the ethics of a firm, like Schwab, which was a firm Wealthfront was trumpeting as the bastion of excellence. Color me skeptical. I’m probably already spending too much time on all of this as it is, but the only reasons I’m here is because 1) I’m simply seeking the truth; and 2) I agree with one of my favorite bloggers, Cullen Roche. We’re arguing about how perfect the low fee services are.” And then, finally, there’s this gem. And as a sweet farewell, if you actually decide to move your account to another brokerage firm, it will take another $5. Young investors are tired of this . I, too, personally think it’s dumb, and agree with Adam on that front, but where he loses me is that somehow the number of pages in their fee disclosure brochure for their brokerage firm is somehow client unfriendly. And that’s just not fair. He’s trying to say Schwab’s robo- competitor isn’t client friendly. And if page numbers do matter and we compare Wealthfront’s SEC filing about their service and Schwab’s about their competitive product — Wealthfront’s. But, again, that didn’t fit the narrative, I suppose. And here’s just what really makes me mad about this whole thing. Again, I’d ask their chairman or submit something in their comments section, but that doesn’t work. They answer the questions they want. He seems like a good guy, and a smart CEO, and he’s passionate about growing his company. And again — This isn’t my fight, I don’t know which service might be better for you, but in the end this isn’t what Mr. Nash’s piece ultimately was about. Everyone loses in that game. I like a lot about them, but also don’t think their effort here was what I would’ve launched . I’m doing some analysis for myself on the portfolios they’re offering now to see what’s really under the hood, but reserving my judgement privately or publicly until I do the work. But let’s also not forget Wealthfront’s iterations to becoming who they are today involved them first being an internet trading game on Facebook, then they were a platform for advisers and investors to use to try to BEAT the market, and now they think buying and holding market- cap weighted indexes funds are the next best thing.
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