are we still all in agreement that robo investing isnt really revolutionary?
google is an innovator, not a bottom a feeder.
i agree with ohai. no point in jumping in a business where the margins are dropping.
i do believe there is still a future for premium relationship hand holding in finance. the old white glove service.
As stated by Google? No, of course not. That would be a horrible strategic mistake. In the industry? Yes, like I said, I hear about this all the time from industry peers.
Perhaps I’m not explaining it correctly but this is a perfect fit. It will not be about profit, at least initially. No, robo advising isn’t new, but a firm that knows everything about you entering the robo world would be very new. And, yes, there’s always going to be a need for personalized service for high net worth individuals that will exist outside of Google.
If you were to talk to the heads of the major broker-dealers - all the wirehouses, Ed Jones, Ameriprise, LPL, Raymond James… - and asked them what the biggest threat to their business is 5-10 years down the road they’d say two things: Regulatory hurdles and Google. I know because I’ve heard them all say this.
Read this - http://www.thinkadvisor.com/2016/06/08/are-advisors-toast-if-google-apple-or-amazon-join
^ no top advisor is going to say google is a top threat to his business. you ask some chump who is 21 who just got hired to EJ’s rookie program and yeah, he’ll say google because he doesn’t know enough about the industry to say anything else and his entire book is made up of people who would quickly jump to roboadvising if the price was right.
my 2 cents is that googlebank is much more plausible than googlebrokerage. if you want to control the money, you own the bank, not the brokerage. the brokerage business could naturally evolve after it builds its bank roster but google having a brokerage with no bank doesn’t make much sense to me. with googlebank they could just say it’s completely free but that everyone must go 100% digital. if you are the top bank, you can attack payment processing from behind and actually attempt to dethrone V and MA. also, online banking drives web traffic. roboadvice is designed to stymy web traffic - set it and forget it.
at its heart, banking is very simple. you set up a system to accept deposits and send withdrawals and make only minor tweaks along the way. providing financial advice is much more complicated. asset allocation bots do not provide advice and don’t replace traditional advisors. that’s why the only decent/true ‘roboadvisors’ today charge as much as brick and mortar brokerages. they still have to pay humans to listen to the client and provide advice. further, say you subbed AI for the human, the legal cost of the AI making a mistake when providing advice would be insane. people are still quite hesitant about suing their advisor. people would not hesitate at all to sue a robot, especially when the robot is backed by several hundred billion dollars in cash.
Do robo advisors typically have E&O? I’d like to see the actuarial work on that.
I doubt that Google will have a true bank either. Do they want to sign up for OCC and Federal Reserve regulation? Sign up for CCAR and black box stress tests? Have stupid regulators mandate random management changes every quarter? As I mentioned, this is crazy baggage that no one wants to deal with and is opposite of the culture of technology companies. Only existing financial institutions who have no choice but to accept these terms to continue business are stuck with these new rules. In principle, maybe these things are simple. In today’s regulatory environment, they are complex and expensive.
What technology companies are interested in are online commerce and payment systems, like PayPal, or newer companies like Square. PayPal is “sort of” a bank, but it is not defined as one, since they don’t accept deposits. If it was worth it for PayPal to offer checking accounts, they would already have done so. However, the complex regulatory requirements make the business not worth their effort.
You are right about one thing - Google is a threat to investment advisors, but not because Google will become an advisor themselves. It’s because Google gives people access to information and enables customers to conduct research on the value of investments as well as performance statistics of different funds types. Consumers can now realize that advisors generally charge too much and that active funds like those that you promote here are usually not worth the money. This drives customers towards lower fee services and fuels the race to zero costs. Google is not interested in joining an industry with increasingly compressed profitability. Vanguard, State Street, even GS and such are offering passive and “smart” investments with 0.10% of costs or less, and this number is going down. If people are telling you that Google is an imminent threat to crowd out these businesses, then it’s no wonder that they are in the dinosaur class of this business.
vanguard is doing a fine job in killing everyone already.
No one is saying Google is getting into the asset management business. Starting an RIA that purely a robo advising shop isn’t subject to many of the regulatory hurdles mentioned above. Still a lot of red tape for Google to cut through, but it’s not that hard.
I have to say, this thread is scary. The financial advising and asset management business models are changing. There are secular shifts taking place as we speak whether or not a company like Google comes in to disrupt things. The difference is if a Google/Amazon/Apple does get into the financial advice sector, things will change much, much more quickly. And from the sounds of things, many people are going to be caught off-guard.
Like I said, let’s check back in five years and see.
+1
remember when general electric was the hottest shit, the place that everyone wanted to work for. they got into finance and they royally fucked themselves. lol
note: i don’t know googlebank is particularly likely just that it is more likely than googlebrokerage. and my version of googlebank looks very much like paypal. who needs a chequing account, or a savings account for that matter, anyway? it’s just a place where money sits, like an online wallet.
in the scariest version of the future, google will pay you to invest passively, and then it will change all of the passive benchmarks to include 100% GOOG shares and Google’s cost of capital will go negative. game over.