You say "robo-advisor." Barry Ritholtz says "online algorithmically driven asset-management solution."
Tomato-tomahto…potato-potahto – let's call the whole thing automated online investing. And for the last nine months, Ritholtz Wealth Management has offered it. Liftoff is a low-cost way for millennials to start saving for retirement, Chairman and Chief Investment Officer Ritholtz told ThinkAdvisor in an interview.
The otherwise high-net-worth-focused RIA quietly launched Liftoff last October. With scant marketing, it has been "growing organically – slowly and steadily," says Ritholtz, who describes assets under management as "fairly modest." The account minimum is $5,000.
The automated digital platform, from Upside, employs Ritholtz's proprietary asset management allocation for long-term investing. It uses commission-free ETFs only in a broad assortment within a variety of asset classes.
Though clients may contribute annually, a major intention is to "train" people in their 20s and 30s to make regular contributions, says Ritholtz, whose popular financial blog, The Big Picture, boasts 1.5 million page views monthly and who presciently warned his clients of the housing and derivatives debacles.
Liftoff portfolios, rebalanced regularly, use mostly Vanguard ETFs, with one ETF each from iShares and State Street. Funds are custodied at TD Ameritrade.
When RWM and Upside introduced Liftoff last fall, Ritholtz's firm owned a small stake in the online services provider. But now it has no equity following Upside's acquisition by Envestnet this past February.
Ritholtz, an angel investor in technology startups, has long been tech-minded. A former attorney, he worked in finance originally as a trader, then as a researcher and strategist for more than a decade before moving into asset management. In 2013, he founded New York City-based RWM, of which Josh Brown is CEO.
ThinkAdvisor recently spoke with Ritholtz about his firm's robo service and today's three investing modes as he frames them: "Do-it-yourself," or self-managed; "silicon," or robo advisors; and "carbon-based life units" — that is to say, human advisors. Herewith are excerpts from the interview:
ThinkAdvisor: Do you object to Liftoff's being called a robo-advisor?
Barry Ritholtz: I don't find that insulting. Who cares what people call it! It is a robo-advisor. It's software that helps people make better investment decisions based on well-understood principles of global diversification and asset allocation.
Many millennials are distrustful of Wall Street and financial advisors. Why would they have trust to put money into an automated investment system?
The millennial generation is very comfortable living online with everything from Google to LinkedIn to Instagram to Tinder. Those are all algorithmically driven. So if [even] your dating options are driven by an algorithm, this is just another piece of software with an advantage. But don't millennials need handholding from a human advisor?
Speaking to someone in finance is not what gets them especially enthusiastic. And if you have a 40-year investment horizon, who cares what the market does today or yesterday? If there's a pullback, the millennial's concern shouldn't be "What's going on with my portfolio? I have to retire in 44 years!"
What should it be?
"I hope this isn't a big recession and I'm going to lose my job!" If you have a multi-decade horizon, day-to-day volatility is just noise – you can ignore it. But if I were a millennial [while aware of effects on the economy], I'd be rooting for a huge market crash so I could buy as much stock as possible as cheaply as possible.
Will robo-advisors usurp traditional advisors' position and livelihood?
It's clear that most of the asset management business is going to offer some form of low-cost software-driven asset allocation modeling. That's the future for a substantial portion of the industry. But I don't see robo-advisors making full-service wealth management go away. These are two very different sets of services geared to two very different sets of investors.
Who is Liftoff targeting?
Somebody who doesn't have the complex needs for a full-service wealth management shop, or who doesn't want to deal with someone on a one-on-one basis, or who only has a small amount of money they want to start with and therefore may not meet the minimum of the average advisor firm.
Making investments on their own wouldn't work?
Left to their own devices, people do stupid things with their money, including how they invest it.
What distinguishes Liftoff from other robo-advisors?
