THE MAGAZINE FOR ETF ADVISORS - Wealthfront · PDF filethe magazine for etf advisors /////...
Transcript of THE MAGAZINE FOR ETF ADVISORS - Wealthfront · PDF filethe magazine for etf advisors /////...
M A R C H 2 0 1 3T H E M A G A Z I N E F O R E T F A D V I S O R S //////////////////////////////////////////////////////////
www.IndexUniverse.com/ETF!Report P U B L I S H E D BY
!%Wealthfront Wants to reWrite advisory fees
6 IndexUniverse.com/ETF!Report
Odds are pretty high that, if you’re reading this, you’re a financial advisor. You’ve spent years build-ing a business, attracting clients (or just assets) by going to business dinners, group functions or conferences. You’ve identified a specific base of clients—likely in the high-net-worth range of $1 mil-
lion and above—and you’re going after them. While it may have made sense to charge commissions in the past, you know that the best way for you to profit is to collect a fee based on the client’s assets: 1 percent per year sounds about right.
It’s been a good, profitable run. But now there’s a growing threat to that world, intent on turning that model upside down. A new generation of financial advisory firms wants to eat your lunch. Instead of catering to the wealthy, they’re broadening their reach to include a demographic just beginning to grow its assets. Instead of accruing new business with fancy dinners and face-to-face meetings, they’re using social media and a hands-o! approach. They’re educating their clients through seminars and blog posts instead of golf outings and financial buzzwords. And they’re only charging 25 basis points a year for it—no matter how much money you want to invest.
Meet Wealthfront.
wants to shatter the business QSHIP�QSWX�ÁRERGMEP�EHZMWSVW�
use, while helping the next KIRIVEXMSR�SJ�MRZIWXSVW�KIX�
their foot in the door.
SILICON VALLEY’S
"EALTHFRONT
#OODBYE!%
By Cory Banks
Andy Rachle!, left, and Dan Carroll built Wealthfront to o!er
low-cost money management for
the next generation of investors
8 IndexUniverse.com/ETF!Report
Left to right: Jed Broce, Client Relationship Manager; Jim Meyer, VP of Engineering; Adam Nash, Chief Operating O"cer
SILICON VALLEY SWAGAndy Rachleff, Wealthfront’s president and
CEO, has a long career as a venture capital-
ist in Silicon Valley, co-founding Benchmark
Capital in 1995. Dan Carroll, the founder
CPF�EJKGH�UVTCVGI[�QHƂEGT��KU�VJG�PGY�DNQQF��A Chicago native, the 31-year-old had al-
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p/[� OQO� YCU� C� VGCEJGT�q� UCKF� %CT-TQNN��pCPF�O[�FCF�YQTMGF�KP�KPUWTCPEG��5Q�+�JCXG�C�IGPGTCN� KFGC�QH�YJCV� VJG[� UJQWNF�CPF�UJQWNFPoV�DG�KPXGUVKPI�KP�q�6JG�HCOKN[oU�ƂPCPEKCN�CFXKUQT�JCF�VJGO�KPXGUVGF�����KP�risky stock mutual funds: "juicy" products
HTQO�#OGTKECP�(WPFU�VJCV�RCKF���D���HGGU�VQ�VJG�DTQMGT��#PF�QH�EQWTUG��VJG�CFXKUQT�HCE-VQTGF�KP�VJG�UVCPFCTF����OCPCIGOGPV�HGG�
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CV�� 6JG� UGTXKEG�� ECNNGF� MC%JKPI�� CKOGF�to use the same methodologies that Ivy
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uity managers. “Most people don’t realize
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6Q� OKTTQT� VJG� GPFQYOGPVU�� MC%JKPI�evaluated money managers on metrics like
KPHQTOCVKQP�TCVKQ��SWCNKV[�QH�TGUGCTEJ�CPF�JQY�VJG[�UVKEM� VQ� VJGKT�EJQUGP�UVTCVGIKGU��6JG� DWUKPGUU� RNCP�YCU� VQ� EQPPGEV� ENKGPVU�YKVJ�VJGKT�JCPFRKEMGF�CFXKUQT�DCUG��MGGR-
KPI�����QH�VJG�OQPG[�OCPCIGToU�HGG�� +PK-tially, Carroll and Rachleff didn’t think
they could attract the professionals they
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DQQM�CRRNKECVKQP�VJCV�CNNQYGF�KPFKXKFWCNU�to demonstrate that they could outper-
form Wall Street. Using this technology,
the duo opened up their community to
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ding company’s audience repeatedly told
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6JCVoU� YJGP� %CTTQNN� CPF� 4CEJNGHH�DWKNV�9GCNVJHTQPV��
9MARCH 2013
Left to right: Qian Liu,
Director of Investment Research; Amy Lee,
Senior Software Engineer; David Fortunato,
Chief Technical O"cer
Je! Rosenberger, VP of Investment Research
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r U.S. stocks
r� �(QTGKIP�FGXGNQRGF�OCTMGV�UVQEMUr Emerging market stocks
r Real estate
r Natural resources
r Bonds
A potential client comes to the com-
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see the portfolio for free. In fact, it’s only
after you see this information presented
on the screen that Wealthfront even asks
for your name.
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including the Van-
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All of this takes place automatically
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������C�[GCT��OCZ�
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are open: Only the conference room and
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design; it helps the
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WEALTH FRONT’S SWEET SPOT IS THE PERSON
IN THE WEALTH-ACCUMU LATION STAGE
10 IndexUniverse.com/ETF!Report
//////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
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tion and protection.
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+P�&GEGODGT�������VJG�ƂTO�CPPQWPEGF�VJCV� $WTVQP�/CNMKGN�� VJG� HCOGF� 2TKPEGVQP�University economist and author of “A Ran-
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p9G�FQPoV�FKUENQUG�QWT�CUUGVU�q�JG�UCKF��When pressed, he added, “We feel that
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tractors may say
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assets or a less-than-three-year track record
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THE NEW WAVE9GCNVJHTQPV�KU�LWUV�QPG�ƂTO��DWV�KVoU�RCTV�QH�C�PGY�YCXG�QH�VGEJ�FTKXGP�CFXKUQT[�JQWUGU�VJCV� TGRTGUGPV� C� TGCN� CPF� UKIPKƂECPV� EJCN-NGPIG� VQ� VTCFKVKQPCN� YGCNVJ� OCPCIGTU�� 6Q-
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ered costs and commoditized portions of
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end. Because I don’t think they have a lot of
OQPG[�WPFGT�OCPCIGOGPV�TGNCVKXG�VQ�YJCV�a traditional money manager may have. But
they’re on the right track, and technology is
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Dan Carroll explains how Wealthfront’s focus on technology helps keep
costs low for its clients
WEALTHFRONT IS JUST ONE FIRM, BUT IT’S
PART OF A NEW WAVE OF TECH-DRIVEN
ADVI SORY HOUSES