Robo-advisor research team goes beyond market data to assess performance
A “black box” environment is how Michael Walliser, executive vice president at Condor Capital, described the robo-advisor segment of the investment market. While basic information on philosophies and portfolio features are available on each service’s website, he’s discovered an apparent void in tracking portfolio movements and tools to compare robo platforms as investment choices.
“We’re trying to lift the veil and see what different robos are really all about,” he said, describing his firm’s robo-advisor benchmarking service in a Financial Advisor IQ article. The service, powered by a four-member research team, provides an in-depth review of different robo platforms’ performance. The first study covering the first three quarters of 2016 is available on the company site, with the next data set encompassing the full year pegged for release in January.
“This is a service we’re providing to help inform people about how robos are actually managing their money,” Walliser said. “We’re not looking to make any money off it – this is just an extension of what our research staff is doing in analyzing funds and other investment options for our clients.”
While the review’s value to investors is clear, it is also significant for advisors to look over. “If for no other reason than to help answer questions and show what value a human advisor can add, this is something that really needs to be done,” said Martin Leclerc, who manages about US$67 million and is the founder of Barrack Yard Advisors.
The review doesn’t stop at crunching market data: it also takes into account portfolio construction strategies and quarterly trading patterns, tracking them for more than a dozen major robos. Initial benchmarking from Q1 to Q3 had SigFig leading in fixed-income performance. On the other hand, investment firm Schwab’s robo led in equity performance, as well as in overall performance.
“The importance of this first report is to simply document how differently each robo works,” said Condor Capital President Ken Schapiro. “As time passes, we’ll be able to develop a more complete database to get a better idea of longer-term performance comparisons.”
The current report ranks results in taxable accounts; performance breakdowns for individual retirement accounts, isolated from taxable investments, will be provided in future quarterly reviews. “We just don’t have enough data to do a full-scale IRA report yet,” said Schapiro.
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