Financial advisors have always enjoyed the fanciest of digs; but their plush offices and high-end art are being upended by software engineers sitting at Ikea desks. Silicon Valley swagger is testing Wall Street arrogance in an attempt to transform the insular world of financial advice.
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Wealthfront and Betterment aim to keep it simple; both Websites ask users just a handful of questions about their goals, risk tolerance, and investment horizon. From there, algorithms calculate a recommended asset allocation. After funding the account with an online transfer, a client’s assets are automatically split between several exchange-traded funds. (See the graphic.) The process takes less than 10 minutes and can be done with zero human interaction. Asset allocations are regularly rebalanced and both firms promise tax-loss harvesting, until now the domain of higher-end accounts.
“In general there’s been a lack of imagination about how far technology can go in helping investors,” says Wealthfront CEO Adam Nash. “In the next 10 years, everyone will be using some form of automated investment service. This is like e-commerce in the ’90s.”
