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Should You Use A Robo-Advisor? If So, How Do You Choose?

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Online financial advice is more available than ever, and more investors are taking advantage of these services. Whether or not a robo-advisor is the right choice depends on the complexity of one’s situation and their comfort level in working with advice that is mainly dispensed online, according to Investopedia.

If an investor’s situation involves complex financial planning issues that extend beyond allocating investments and related services, they might be better served with a more traditional advisor who provides advice in areas such as estate planning.

For millennials and those with more modest portfolios who only require asset allocation advice and basic financial planning help, online advisers could well meet their needs.

One of the major benefits of online advisors is the convenience and ease of accessing their services. Online advisers are accessible 24/7. With today’s busy schedules, this level of accessibility appeals to many investors.

How To Choose

If an online advisor is the right choice, the next question is how to evaluate and decide which robo-adviser to use.

Just as traditional financial advisers vary in their areas of expertise, how they are compensated and the types of clients they work with, the same differences exist among robo-advisors.

Most robo-advisors offer investment advice and portfolio management, Investopedia noted.

One exception among the major robo-advisors is LearnVest, which gives investment recommendations but not ongoing investment advice. LearnVest’s focus is financial planning and budgeting. The company also offers live help via the telephone.

Asset allocation and portfolio management are most robo-advisors’ dual focuses. They usually provide the service via EFTs and algorithms.

Beyond this basic service, robo-advisors provide tax-loss harvesting services which allow investors to take advantage of any losses in their taxable portfolio.

Robo-Advisors Have Different Strengths

Some robo-advisors focus on specialized areas. Rebalance IRA, for example, focuses on managing retirement accounts. The company also provides human interaction.

Folio Investing provides EFTs or stock portfolios. Motif Investing provides portfolios consisting of 30 stocks for a single price. Personal Capital gives clients the ability to manage their investments on a consolidated basis, focusing on customers with higher net worth.

Fees To Consider

Fees differ among robo-advisors. The fees usually run between 0.15% to 0.5% of the managed assets. Some also charge a one-time set-up fee.

LearnVest charges from $89 to $399 for an initial review and $19 per month thereafter.

Personal Capital charges 0.49% to 0.89% of the invested amount.

In addition to fees, there are also expense ratios of exchange traded funds and mutual funds. There can also be transaction costs for trading investments.

The option of interacting with a human about investments also varies among robo-advisors.

Because robo-advisors are fairly new, they do not have a lot of investment history pre-dating the current stock market rally. It is not known at the present time how well most robo-advisors will perform during the next major stock market downturn.

Established Players Enter The Space

Some traditional financial service players have embraced robo-advisors, which can be a consideration in choosing a robo-advisor. Traditional financial services firms have the funds to invest and the time needed to enable the services to grow. In addition, as a client’s need changes, they will be positioned to transition to the more traditional services these firms offer. Financial advisors working with these platforms could be a way to connect with younger clients and cultivate them as future clients.

Betterment, for instance, has partnered with Fidelity Investments. Fidelity’s institutional platform can provide a version of Betterment’s RIA version to its clients. Fidelity has also signed an agreement with LearnVest.

Vanguard has announced its own robo-advisor and is considering introducing the service to more customers in the near future.

Charles Schwab will introduce a financial advisor version of a robo-advisor that will allow advisors using its platform to white label the service to their clients for free. Charles Schwab will profit on the underlying assets.

Investors need to decide which robo-advisor best meets their needs. They need to consider the specific services the robo-advisors offer, the level of human interaction offered, the minimum investment required and any fees and expenses charged.

The growing interest of major financial service firms in this area is clearly a consideration for both prospective investors and financial advisors.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.9 stars on average, based on 8 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.




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CBOE Aims to Be the First to List Bitcoin ETF

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The race to list the first bitcoin exchange-traded fund has intensified in recent months even as regulators balk at the notion of crypto-backed funds. When the SEC does come around, CBOE Global Markets Inc. is planning to be the first-mover.

CBOE Takes Aim at Bitcoin ETF

The Chicago-based exchange is confident that the U.S. Securities and Exchange Commission (SEC) will eventually approve a rule change that would pave the way for the first bitcoin ETF. According to Chris Concannon, CBOE’s president and COO, the approval process may not be far off.

“As we chip away at their issues to make them less concerned, at some point they’ll be comfortable with an ETF,” Concannon told Bloomberg on Tuesday.

Concannon took a balanced approach in explaining both the opportunities and challenges of listing a bitcoin ETF. In his view, it’ll take just one domino to fall before we are looking at multiple crypto-backed funds, and in relatively short order.

“Having the underlying futures come to market first, prior to an ETF, I think you have a healthier, more mature market.The problem with a futures-based ETF is, what is the right level of liquidity? It’s never been tested before.

“There’s a huge first-mover advantage in the ETF world,” he added. Once the assets “come pouring in, it tends to continue. We’ve seen that in other ETFs.”

The Best Shot

Concannon’s confidence likely stems from the fact that his exchange plans to list the VanEck SolidX Bitcoin ETF, which the market regards as having the best shot of being approved by regulators. VanEck penned a lengthy letter to the agency in July reiterating industry-wide support for the proposed fund, which claims to overcome many of the liquidity and market manipulation concerns currently held by regulators.

Unlike other bitcoin ETF applications, the VanEck/SolidX proposal plans to back the fund with physical bitcoin rather than track the digital currency through the futures market.

As Hacked reported last week, the SEC has postponed its ruling on the VanEck proposal until the end of September to investigate the matter more closely. This triggered a massive correction in the price of bitcoin and the broader market.

Only a Matter of Time

Although the chances of regulators approving a bitcoin ETF this year have always been low, assent could be granted as early as February of next year, according to Hany Rashwan, the chief executive officer of crypto startup Amun Technologies.

“The SEC is likely to delay until February of 2019 and the chances of a Bitcoin ETF approval in 2018 have always been low,” Rashwan told Bloomberg last week.

In conducting our research, we also came across this interesting tidbit by the crypto journal outlet, which claims to have spoken with a former SEC employee in the know about the agency’s bitcoin deliberations. Here’s what the source had to say:

“The four people I still talk to on the daily at the SEC are basically telling me this ‘it is going to get approved but we are going to make the markets understand that we dug really, really deep i.e. investor protection/transparency’. And that makes sense. The vast majority of the public still has no idea what ‘digital assets’ are or what it means. So when you do an approval like this, and the successive approvals that will follow in this asset class – think of the 3-5 year return number that will be associated with this market? And maybe that is the key to the VanEck SolidX approval? It is set up as an accredited investor vehicle. That singular element is probably what gives so many of us a firm belief in its approval. And it is a stroke of genius by the VanEck SolidX group.”

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 552 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Winklevoss Twins Shift Crypto Focus to Retail Investors, not Resentment

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If anyone in the world has good reason to feel resentment toward Wall Street regulators for rejecting their bitcoin ETF application, it’s Cameron and Tyler Winklevoss of the Gemini cryptocurrency exchange. Their bitcoin ETF product was rejected by the U.S. SEC not once, but twice, the most recent decision of which was responsible for igniting the crypto market meltdown that was exacerbated by the VanEck bitcoin ETF delay.

Instead of harboring feelings of resentment, however, the brothers only seem to be empowered by the development, as evidenced by their decision to focus on the one client group in which they can depend — retail investors, according to a Bloomberg report. If investors could adopt a similar big-picture perspective, perhaps we wouldn’t be in the current situation in which more than $20 billion has been shaved off the total value of the cryptocurrency market over 24 hours.

In fact, for Cameron and Tyler Winklevoss, it’s not only business as usual but it’s more business than usual by the retail segment.

“Wall Street is taking cryptocurrencies seriously, however, the vast majority of Wall Street firms are still not participating in the cryptocurrency market, which remains primarily a retail-driven market. This will change over time, but it will take time,” Tyler Winklevoss told Bloomberg.

Winklevoss isn’t the only one to feel this way. Adam White, vice president and general manager at Coinbase, a rival exchange to Gemini, recently told CNBC: “What’s so unique about cryptocurrencies, and in many ways this asset class, [is that it] was driven by retail investors — not institutions,” characterizing the interest among institutional investors as “profound.”

OTC Market

Meanwhile, a report by Tabb Group earlier this summer revealed that trading volume in bitcoin’s over-the-counter (OTC) market exceeded that of exchanges as much as threefold, which would attach a value of $12 billion in OTC bitcoin trades every day. Here’s the tweet by crypto industry engineer Eric Wall –

A report on Yahoo Finance concluded that the dramatic selling in the cryptocurrency markets on the heels of the Winklevoss bitcoin ETF rejection could have been the result of bitcoin whales selling not on exchanges like Gemini, where the adjusted trading volume over the last 24 hours hovers at $69 million, but instead the OTC market. This inserts a bit more uncertainty into the drivers of cryptocurrency prices.

Nonetheless, it appears clear that the market is placing a great deal of emphasis on a bitcoin ETF, or lack thereof currently. Such a product could open up the asset allocation of large pension funds, for instance, to crypto.

And as for the Winklevoss twins, they already have a “first” in this market. They were behind the maiden Bitcoin Futures Contract (XBT) on the CBOE last December. And if the CBOE has its way, it will be part of the inaugural bitcoin ETF, as well.

Featured image courtesy of Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 40 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.




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Bitcoin ETF Possible in 18 Months: Former Goldman Sachs Executive

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Investors awaiting the arrival of a bitcoin exchange-traded fund (ETF) should’t get their hopes up, according to Ali Hassan, a former Goldman Sachs executive currently running a cryptocurrency asset management firm. In Hassan’s view, bitcoin’s ‘holy grail’ is certainly coming, but not before regulators fully dissect its implications on consumer safety.

Bitcoin ETF: Timelines and Expectations

In an interview with Bloomberg Markets, Hassan predicted that a bitcoin ETF will be approved only once regulators are convinced that the asset doesn’t expose investors to unnecessary risk. As the recently rejected Winklevoss ETF application clearly showed, the U.S. Securities and Exchange Commission (SEC) is not convinced that crypto-backed funds are “uniquely resistant to manipulation.”

“We do think that a product is coming soon,” Hassan told Bloomberg. “Perhaps, in the next 18 months, we’ll see a Bitcoin-only ETF.

Hassan, who runs Crescent Crypto, spoke at length about the potential for bitcoin and other crypto funds to revolutionize asset management strategies. He also said that passive investment strategies in crypto will “actually increase the participation in the market.”

The long-awaited bitcoin ETF has been described as the ‘holy grail’ for its potential to lure passive investors and traditional asset managers to the cryptocurrency market. Hopes for its imminent arrival helped spur a nearly 30% rally in bitcoin’s price last month.

Some analysts believe that a joint proposal submitted in June by VanEck and SolidX has the best chance of gaining regulatory approval. The SEC could rule on the fund as early as Aug. 16, though many believe the process will drag on for several months.

Hassan’s Crescent Crypto fund invests in 20 high-profile digital assets that meet specific requirements tied to market capitalization, liquidity and security.

According to the company’s third-quarter report, cryptocurrencies are broken down into four brackets or “sectors,” including: store of value, platform, value transfer and anonymity. Bitcoin, a “store of value” currency, accounts for nearly 45% of the portfolio. “Platform” Ethereum is second at 19.3%. They arefollowed by Ripple and bitcoin cash (“value transfers”) and EOS (“platform”).

For “anonymity,” the fund includes Monero, Dash and Zcash.

Debate Continues

A debate over bitcoin and crypto-backed securities is being waged within the SEC’s own ranks, underscoring a gradual shift in how regulators approach the subject.

Last week, SEC Commissioner Hester Peirce formally dissented to the regulator’s ruling on the Winklevoss ETF. In a lengthy statement published on the SEC website, Peirce said:

“I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market. More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order. More generally, the Commission’s interpretation and application of the statutory standard sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of bitcoin ETPs.”

On Thursday, Hacked commented on a transcript that described a “heated debate” on cryptocurrency between SEC Chairman Jay Clayton and an unnamed attorney. According to Eric Werner, an associate director of enforcement with the SEC, Clayton is giving the cryptocurrency debate “the same dedication and thought process” as every other issue he has faced throughout his tenure as agency chief.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 552 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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