1. ROBO-ADVISORS: FINANCIAL DISRUPTORS QWAFAFEW MARCH 15, 2016
Jarrod Wilcox
ROBO-ADVISORS: FINANCIAL DISRUPTORS QWAFAFEW MARCH 15, 2016

2. DISRUPTORS YOU HAVE WATCHED
Newspapers vs. Craigslist
Booksellers, retailers, malls vs. Amazon
Taxis vs. Uber

3. INVESTING: VULNERABLE
PAIN POINTS
Expert customized service too expensive for most
Can’t judge quality until too late
AVAILABLE TECHNOLOGY
Inexpensive Internet delivery
Low barriers to modeling high quality decisions
LEGACY RIGIDITIES
Large organizations too conflicted to adapt easily

4. BARBARIANS AT THE GATE SEARCHING FOR BUSINESS MODEL
Mint (sold)
Learnvest (sold)
Future Advisors (sold)
Wealthfront
Betterment
Personal Capital
PROTECTING BUSINESS MODEL
Schwab
Vanguard
BlackRock
Fidelity

5. STILL EARLY INNINGS, BUT…
Now

6. FAST-IMPROVING TECHNOLOGY
Data aggregators (walled gardens breaking down)
Better decision modeling & optimization tools
Financial planning opening up
Low-cost, scalable websites
Mobile Internet service delivery
Blockchain and crowd-sourcing for “illiquid” transactions

7. INTEGRATING FINANCIAL PLANNING WITH INVESTING: THE DISCRETIONARY WEALTH FRAMEWORK

8. FINANCIAL PLANNING: TIME SHIFTING

9. GOALS & CASH FLOW PLANNING

10. THE BIG PICTURE

11. REALISTIC RISK SIMULATION

12. AFTER-GOVERNMENT RETURN POTENTIAL
LOW END (now)
IRA, 401(k) training and reinforcement
Social Security advice
MIDDLE TIER (now)
After-tax portfolio optimization
Optimal asset location in IRAs, 401(k)s
Tax loss harvesting
Optimal withdrawal
HIGH END (beginning)
Estate planning

13. SIMPLIFIED INVESTING Risk allocation ~
1) Expected risk premium (after-tax), divided by…
2) Variance (after-tax) * 3) Leverage on discretionary wealth.
Get right discretionary wealth and effective tax rate.
How many securities would meet most people’s needs?
2 to 6 for index ETF’s.
Much less than for active management.

14. RETAIL INVESTING STRATEGIES POTENTIALLY AUTOMATED
Focus on simplicity
2 to 6 passive ETFs
Recourse to changing discretionary wealth
Investing
Spending
Match tail exposure & investor leverage
Add feature funds
Social concerns
Psychological matching
Individual securities
Maximize loss harvesting potential
Complementary funds
Allocate to annuities & insurance

15. PARTNERSHIPS MAY DOMINATE
Many people will value human empathy and coaching, as well as ability to handle exceptions to pre-conceived models.

16. PREDICTIONS “Robo-adviser” market share growth will accelerate:
Improvements with experience
Exponential word of mouth contagion
Does not depend on true artificial intelligence.
Human/automated partnerships will capture most of the early potential market.
Human service skills will migrate toward more financial planning and coaching.
Market share for active investment management will shrink where it does not add comparable value.

17. WHAT TO REMEMBER
Integrating financial planning with investment management offers new opportunities for professional knowledge delivery.
Its automation is a disruptive tsunami, coming because it offers greater value added at lower cost than conventional narrow investment management.
The discretionary wealth framework can help.