Hello Guest User, You are visiting this website from a computer with an IP address of 172.70.127.141 with the name of '?' since Thu Apr 18, 2024 at 2:10:27 PM PT for approx. 0 minutes now.
Now that the world's biggest asset manager has bought a "robo-adviser", as reported by the New York Times, the writing on the wall should be very clear to financial institutions that style themselves as "asset-gatherers". The humans who work for such firms should especially pay attention, because the 2 and 20 compensation structure is history. In "robo-advising" the human interface disappears entirely. The client opens an account and completes the online questionaire whose underlying algorithm computes a text-book risk profile with an associated portfolio structure. The "robo-adviser" firm then automatically stuffs the various risk categories with structured products from a pre-approved list, and monitors the portfolio balance on an ongoing basis, tweaking the positions in the different risk categories to keep them in harmony with the ideal portfolio balance for the profile. The problem for the financial sector is that without the human interface, the time and physical cost of providing this service collapses, promising a future of "managed" accounts that get charged an annual portfolio value fee as low as 0.1%. That is good for the consumer who wants a low risk, low reward portfolio as cheaply as possible, but it is bad for individuals who hope to make a career as a financial advisor. It is also good for the resource juniors, which are threatened with extinction by the Client Relationship Model developed by the self-styled Canadian regulator IIROC and their establishment banking overlords. The CRM turns the financial advisor into a "suitability manager" by creating a litigation risk whenever a position turns bad for a client which in retrospect can be deemed "unsuitable" for the client based on his or her risk profile. The problem with individual securities is that even the supposedly best company can blow up tomorrow. The way around this catastrophe risk is to create structured products such as an index fund or an exchange traded fund which the financial institutions love to invent because they come loaded with fees. Unfortunately, when it comes to resource juniors, ETF's are simply not possible because the companies are small, illiquid and far too plentiful. So the current trend to fee based asset management, backed by the CRM cudgel, is neutralizing all accounts with a financial advisor as a receptacle for individual stocks. This is killing interest in the resource juniors because the only accounts that are allowed to buy individual stocks are 100% responsibility accounts, either at a discount broker where the client never interfaces with a human and enters orders online, or with a broker where one has filled out paperwork declaring oneself an absolute moron on a suicide march to financial oblivion and which broker has one function, namely to do as told. The rise of the "robo-advisers" is good for the resource juniors because it puts all but the wealthiest clients on track to what is in effect a 100% responsibility account masquerading as a 0% responsibility account. For now the majority of investors are stuck in "human-advised" accounts where buying a resource junior has become taboo. But as these get gradually converted into low cost "robo-advised" accounts that return Wall Street's random walk, clients will be one step away from opening a second "gambling" account that is clearly 100% responsibility and thus can own individual stocks, including resource juniors.
