Personalised Investing

BlackRock recently acquired Future Advisor, and this is the description of what it does on its website:

At FutureAdvisor, we believe that long term, fully diversified investing provides the best results over time. When you combine that with the diligent algorithmic monitoring that auto-rebalances your accounts, identifies tax-saving opportunities daily and manages all your multiple accounts, instead of just one, it’s a service that’s hard to beat.

We bring our advice to you, and manage money in accounts in your name, not ours, with custodians you trust. We hold all your assets with Fidelity or TD Ameritrade, so you know that whatever happens, your wealth is safe, and always accessible through a third party. Since we can manage all of your accounts together, it means we can place your investments tax-efficiently and choose the most suitable ETFs for your situation. Cookie-cutter investing leads to cookie-cutter results – that’s why everything we do is completely personalized to your risk appetite, age and the needs you express to our financial advisors. That makes us the most comprehensive service available.

There is another firm that offers personalisation, but in a different way. Here is how Motif Investing describes itself:

Motif is a new way to invest thematically. Anyone can take a great idea and turn it into a great investment. We make it easy for you to invest in your own ideas. Motif is an investment product like no other and takes investing to the next level. With motifs you can get index-based, transparent exposure in a low-cost customizable product. Motif is a trading platform built for speed. Motif’s unique trading platform lets you customize or create your own motif from scratch and then buy up to 30 securities with a single click.

It is a small step from here to mix in a quant model and take the basket trading approach from Motif Investing and Future Advisor’s personalisation features and expand this to create single-stock portfolios instead of funds.

Everyone may be better off. One gets scientifically testable strategies that are tailor-made to one’s needs. Additionally, if these personalised portfolios are sufficiently different from each other, then crowding may become less of an issue when compared to the trend-chasing mutual funds trading.

In essence, assuming that this can be done at low cost, I can already think of one strong advantage to this: due to the unique needs of every individual, this variety will give different concentrations of investment in every portfolio. There will no longer be issues of a majority of funds investing in the same indices, or funds with similar investing models or people flitting in and out of similar themes.

The value in a financial advisor would then migrate from paying for ‘middle-man thinking’ and plain execution service, where the marginal cost is almost zero, to offering a highly customisable, personalised investing.


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