Are Portfolios-to-Go Threatening Full-Service Brokerage and Advisory Firms?

have a connection to the communities they serve, portfolios-to-go can be fly-by-night operations without the stability and accountability of traditional firms.

One big problem with portfolios-to-go is getting access to their performance histories. Many are too new to have a detailed performance history, while others are unable to track the actual performance of their customers' accounts because they do not have custody over those assets.

Another obvious downside to portfolios-to-go is the loss of face time with clients. The ease of doing everything online strips consumers of face-to-face meetings with their dedicated wealth managers. Despite the higher costs associated with dedicated wealth managers, clients get more and better service from traditional firms. In fact, not all pre-packaged portfolio sites offer personalized investment advice.

Are Portfolios-to-Go a Threat to Full-Service Brokerage and Advisory Firms?

The short answer to the question is probably not.  Bloomberg quotes a spokesman for Morgan Stanley Smith Barney who puts the matter succinctly. "People don't come to Morgan Stanley Smith Barney for discount trading," he said. "They come for professional money management and to access some of the products and services that are only available through a global investment bank."

Portfolios-to-go are a niche product and aren't competition for full-service brokerage and advisory firms. In fact, they may offer you an opportunity to streamline your practice, and use your time more efficiently. Many advisors could benefit from reducing the size of their client list, but firing clients isn't easy, especially when they have no one else to go to for financial advice.

The portfolios-to-go model may offer these clients an affordable—and probably adequate—substitute for in-person advice. The clients may benefit because fees for financial advice and products will be reduced. You might even benefit by paring down your client list, giving you more time to focus on growing your business and focusing on higher-net-worth clients who will benefit the most from your personalized advice.

To conclude, we believe that professional advisors will always be in demand. Although portfolios-to-go can benefit some lower-net-worth investors, the 'cookie-cutter approach' isn't suitable for everyone. There's also the possibility of scams, which will undoubtedly be exposed as the market for prepackaged investment advice continues to expand.

For additional coverage of this issue and similar ones, we invite you to sign up with AdvisorOne's partner, AdvisorFX, for a free trial.

See also The Law Professor's blog at AdvisorFYI.