In recent years the average investor has never had it better. Upstart trading platforms like Robinhood and Etoro have dramatically improved access to capital markets and pushed free trading to become the norm. At the same time, the rapid growth of ETFs has made it easy to replicate any investment style, giving investors the ability to express themes that go far beyond traditional equity indexes and individual stocks. The richness of the investable universe, coupled with commission-free trades, has put active wealth management within reach of every investor.
But there’s a catch. The supporting infrastructure – advice, guidance, tools for fundamental research, and risk management software – hasn’t kept up. It’s DIY or bust, even though many could benefit from some expert advice. While traditionally only thought of in the remit of the 16 million High Net Worth individuals, McKinsey estimates there are now 42 million “mass affluent” investors worldwide who may also need some type of investment advice. And yet, with this increasing demand there is a shrinking pool of advisors. Furthermore, many advisors continue to rely on difficult-to-scale tools like Excel, making it nearly impossible to deliver highly customized advice to a large number of people.
A substantial number of mass affluent and high-net-worth clients were already comfortable handling their finances at a distance. McKinsey estimates that, in most markets, at least 20 to 30 percent of these clients are likely to subscribe to the virtual model, using some combination of a digital portal and a remote advisor. This percentage is likely even higher in Northern Europe and parts of Asia where digital usage is more pervasive.
As a rapidly increasing proportion of investors get comfortable with digital delivery of research and advice, robo-advisors have begun to fill the gap. Nonetheless, their promise — fully autonomous from human advisors — hasn’t yet been fulfilled. Their capabilities don’t extend far beyond reasonably generic recommendations resulting in some flavor of either a risk-parity or a Markowitz mean-variance optimized portfolio, a concept invented in 1952.
That leaves most people to rely on Yahoo Finance and their own intuition if they want to manage their portfolios more actively.
…most people still rely on Yahoo Finance and their own intuition if they want to manage their portfolios more actively.
Is there a middle ground between attempts at full-scale advice automation and a dedicated human advisor? We think so. The car industry offers some interesting insights on this. Although self-driving cars may be some time away, working towards that goal has brought about rapid advancement in driving technology. The result is that a human-driven (or supervised) car is now dramatically safer than a self-driving one.
We built TOGGLE Copilot with that same aim – a middle ground between full automation and relying entirely on human intervention. The starting point? A completely reimagined “portfolio dashboard.”
TOGGLE Copilot offers its users a hyper-aware dashboard that, much like a car, delivers a constant stream of highly curated critical information. Instead of the old table of positions coupled with a stream of Reuters or Yahoo news to the side, the dynamic TOGGLE portfolio dashboard scans vast amounts of price, fundamental, and news data in order to alert the user when (and only then) something happened that could impact their assets. To do so, it relies on a sophisticated knowledge graph that’s constantly learning about new sources of information and how they might impact an ever-expanding universe of assets.
We rely on a car computer to tell us we are low on gas, or we’re getting too close to the vehicle in front of us. Similarly, we should expect our portfolio dashboard to warn us about declining analyst expectations for the earnings of a stock we own, and run the analysis of what’s likely to happen next to its price. And it’s not a stretch to rely on your portfolio dashboard to alert you when changes in economic conditions – rising jobless claims, declining indicators of economic activity like the ISM – point to downside risks to your holdings.
In fact, access to this kind of technology can also make wealth advisors more productive. They can spend less time copying and pasting data into excel spreadsheets – a process rife with errors – and more time speaking to clients, strategizing about the best course of action using TOGGLE’s input.
To learn more about TOGGLE Copilot, visit www.toggle.global