Steve Lockshin: “People want choice and Schwab is advertising for all of us.” “The entire industry seems to have their head in the sand. Lots of talk, lots of dismissing and, although that’s changing, very little action.” “This is really the top of the second inning in this space,” Lockshin says. (NYSE: SCHW)
“Having Schwab on board really helps us,” says Steve Lockshin, founder of AdvicePeriod and principal at Betterment Institutional. “The advisor solutions are really a bionic platform and we’re creating a category that is needed. Schwab is creating awareness. What if Baskin-Robbins said they’re only serving one flavor?
People would be angry. People want choice and Schwab is advertising for all of us.”Jemstep Inc. founder Simon Roy also thinks the Schwab robo launch lifts all boats. “If anything this has increased an interest in Jemstep and we’re seeing much more attention. This has generated a lot of advisor demand and interest,” he says.
“I think being free may make them cautious,” Roy contends. “I think advisors are becoming smarter shoppers when it comes to technology and they understand nothing is truly free and there is a cost to the service that will be paid in some way — likely paid out of clients’ portfolios. For RIAs who are fiduciaries they should be selecting the portfolios for their clients and the cost should be explicit.”
“It’s a tool for us to help smaller accounts and get a good asset allocation and keep them invested since people aren’t disciplined,” Rita Lee says.
“If the risk tolerance is 20% in bonds and the algorithm will rebalance it to 20% and I want to know how far it will drift,” she says. “The fewer trades you make, the further you will drift away from 20% but if they’re trading daily then that’s a lot of trades. I also want to know if I make a change to models does that automatically trigger a rebalance.
These are some of the questions we need to know. We think this is a tool for smaller accounts. This is a pretty good tool and it’s not bad at all.” One aspect Lee is quite impressed with is the ETF selection. “A lot of the popular ones are already on it and you can trade for free.”“There are some key differences between this platform and the one for retail. The minimum cash for retail is 7% and can be a lot higher. With the advisors the minimum is 4%,” Lee says. “If it’s in a money market, you’re paying too. This does a lot of work for you. You can start a small account and continually add money and trade for free with this platform.”