Having spent 6 years as a fully licensed Financial/Investment advisor as firms both large and small (independent), I can say that while I think this is a cool project, marketing it towards investment advisors likely isn't going to get much traction. This is because 99% of advisors (in the US) already have access to tools like this, except much more in depth and integrated with their trading systems. It's in every broker-dealer's (the companies whose investment products the advisors are selling) best interest to provide as much sales support and tooling as possible to their registered reps, so many of them provide things like this free of charge.
Aside from that, unless this has been vetted and audited by FINRA or a registered CRCP, the chances that any compliance officer (which every RIA is required to have), are virtually non-existent. I haven't dug into the platform to see what type of guidance you're offering/presenting, but you need to be really careful about what advice you give or state that you give. As in the US, anything even remotely related to any investment vehicle is highly regulated and providing guidance and advice without the required registrations, licenses and oversight can and will land you in very hot water, very fast.
All that said, I think with the right approach, something like this could be great for personal use as long as it integrated with multiple investment companies and could track and recommend based on all of them.
Are you saying all software used by RIAs has do be vetted and audited by FINRA or a CRCP? I don't believe this to be true.
We don't offer advice, only code.
Could you point me to a few custodians or broker/dealers that provide portfolio management & rebalancing software for free? We haven't found any, but def don't have the same experience as you, so maybe we're just missing something.
No, I'm not saying software used by advisors HAS to be vetted. I'm saying that I don't know a single compliance officer that would green light a piece of software that provides any type of financial analysis, or recommendations to be used by their company as a whole without it being audited. Due to regulations, the risk is just too high. Now whether the individual advisors use it on their own is a different story. But the main issue there is that there are already an obnoxious number of channels, apps, systems that advisors have to use, the last thing most want to do is add another system into the mix, unless that system greatly simplifies things and integrates into their existing systems somehow, it probably isn't going to happen.
You're not offering advice, but you're offering the code which generates recommendations on position allocations. Any recommendation is considered 'advice' by FINRA and has to follow strict suitability requirements. Whether or not this would require any registration, licensing, etc on your part I have no idea, but it's definitely something I'd check into just to be safe. In general as long as you're not charging in some way for said advice there's no FINRA requirements, BUT that doesn't mean there wouldn't be any liability.
Every broker/dealer has their own management software/platform for client accounts, some more comprehensive than others. Though I don't know any of them that allow use by the general public, you have be be a registered rep of their firm to use them. The reason you don't see them publicly available is because of regulatory requirements regarding suitability for recommendations. Though companies like Fidelity and Schwab have some pretty in-depth tools for account management on their sites.
I see what you're saying. Agreed, there are barriers to entry and the market is competitive.
I think one place we haven't been clear yet is what wealthbot.io does. He doesn't actually generate recommendations on position allocations. He is a platform for advisors to set up their own risk questionnaire and tie that risk questionnaire to a portfolio of the advisors creation.
just to add a little... in a grand scheme of things wealthbot.io is not very different from excel. (except we do a few more things, which relate to an RIA's daily workflow).
at the end of the day we will generate a trade file (or signal) but that's it, it's up to RIA to ensure that final decision is correct.
i would say that we encourage people to look at the rebalancer logic, adjust/modify and be aware of the flow in the system.
plus there's is a portfolio accounting system which ensures accuracy in all transactions performed by the custodian.
it's exactly the opposite of what is going on in fintech world. we offer complete transparency... and although you could think of our rebalancer as an "advice giving" tool, in reality it simply calculates and adjusts out of balance holdings. the final financial advice is on the RIA, as it is today. we simply give them tools, which they don't have today to manage their clients/portfolios free of charge (open source).
if an RIA only wants to use an on-boarding portion of the product and do their rebalancing the way they like to do it, that's completely up to the end-user.
you have some good points, that are definitely important.
as far as technology we do not offer any investment advice .. we offer a platform for wealth management. RIA's a primary target audience, but the core logic can be used in other implementations.
you are right that before going to production the system needs to be verified by a 3rd party in order to ensure that it measures up security-wise..
but this is no different than having a similar audit done for any ERP, (PCI compliance for ACH/ shopping carts, or any other software you can think that deals with financial data...)
Sorry, but I don't see anyone using this ever. Managing money is mostly about making constituents feel comfortable and this does not. This doesn't strike me as the type of subject matter to do as a side-project or hobby.
I don't understand this kind of cynicism. As a financially literate individual, I think this is pretty cool and will probably give it a go at some point. What's more comforting than a locally hosted app in a vm you can tailor however you want? I certainly prefer that over handing all my financial data to some 'cloud' service.
I really don't like being critical but I think this is just kind of silly (at least for US citizens). For example, first survey question: are you "Interested in experiencing dramatic short term losses for better returns?". "Interested"? Really? "Dramatic"? Is that just unfortunate word choice or is this thing just not legit?
First of all, Betterment and Wealthfront are good companies. If "startups" concern you, check out Schwab's robo-advisor service or, better, get a Vanguard LifeStrategy fund.
What's even cooler, thought, is that this "dummy data" is loaded with fixtures. Meaning we can update it and next time you or I install wealthbot.io, no more poorly worded question!
Another gif - http://i.imgur.com/1QATMeC.gif
Finally, a quick note on robo advisors. These are great services, wealthbot.io doesn't compete with them. That being said, there is no such thing as a free lunch. Be weary of Schwab's portfolio suggestions, as the CEO of Wealthfront mentions in this article - https://medium.com/@adamnash/broken-values-bottom-lines-3d55...
That also makes me think this is a potential legal nightmare for RIAs using it. Those survey questions you see on other sites (and pretty much all the text on the page) has gone through a ridiculous amount of legal review before it goes live.
that would be true for any public-facing text, which relates to financial advice. a good CFA (RIA) knows what to ask and how to ask, it's not really that complicated.
1. please realize that this is an open source project, so every single line of text or code can be changed to your liking. (not to mention that these are simply sample questions, and any end-user can edit them to be as complex or simple as they like).
I can just as well ask your feeling about sky-diving and judge your risk tolerance based on that.
2. You have to understand the target audience. Today RIA's can pay lots of money to schwabs, fidelities, etc. Which have significant vendor lock-in and high up-front and maintenance costs, with open source RIA's have a choice they can build out a solution custom tailored to their needs using our platform. They are not locked into any specific security or cost basis. They can compete with robo-advisors without spending millions or hundreds of thousands on technology.
(btw, wanna build anther robo advisor, run many firms as SaaS or build an app like Acorns? .. you can do that too).
3. Finally you can try a portfolio consisting of S&P 500 only, another Vanguard LifeStrategy only, and something more complex... just for shits and giggles see whether you can do better or not.
(Wanna test a portfolio that is rebalanced vs non-rebalanced? You can do that.)
our platform is open-source alternative to costly closed-sourced solutions (this is not a new market, we are just giving users another choice)... like there are 100's of shopping carts out there, it's time for fintech to embrace some projects which cater to the masses, not only select few.
RIAs would be nuts to use this as it has gone through virtually zero legal/regulatory review. I dislike legal as much as the next guy but when it comes to managing other people's money, the legal/regulatory environment is exceedingly strict. You can't just pick up some random software off GitHub and start using it.
but whenever you implement any financial software, you go through the same audits. whether you paid $1M for it or got it for free.
you do realize that most banks run on open source platforms (linux). and there are countless magento installations out there?
to debate whether an open source alternative is viable to a closed-sourced model we'd have to travel back 20 years, when this debate was relevant.
and bashing free stuff, is like bashing free samples at the super market... feel free to move along.
Quite a bit different. There are very strict rules (in the US) about how RIAs, brokers, banks, etc can communicate with clients and prospective clients.
lots of people are using robo-advisors and RIA services... so i think that part is already proven.
now as far as webo specifically, if the community gets behind it.. this platform can be as secure, robust and feature-full as any fintech platform out there. btw, we are already pretty sophisticated. we spent quite a bit of time building a full fledged solution that has a plethora of popular features (from tax loss harvesting, to muni substitution, to various rebalancing methods and portfolio accounting)... so a lot is done, but a lot of help is also needed from community.
(magento anyone?)
not to mention our goal is to enable not only RIA's but also developers, by allowing them to create plugins (and possibly profit form it)...(again examples are magento/wordpress)
Need a connector to your favorite custodian? there's an app for that.
Need a more clever rebalancer? there's an app for that.
Need a new theme or improved workflow?
How bout additional ACH features?
our product is highly modularized so having developers hook into the system to expand on the core features is something that's more important to me personally than seeing if s&p 500 will outperform my personal EFT portfolio (which it hasn't ;)
Cool! Even if a demo is great, with the complexity to setup I would prefer screenshots as well to show some standard use-cases.
On the technical side: You should really upgrade Symfony to version 2.7 (new LTS), the 2.1 you use is not supported aynmore. In the demo (production environment) you should hide the webtoolbar for security reasons.
Really like this. Even the cheapest robo-advisors like Betterment charge 0.1-0.3% on top of the fund fees, which sounds small but eats into gains over time.
However, I think the target audience is probably more likely individuals rather than financial advisors, unless you're going to be running it as a SaaS. I can't see the overlap of small advisory firms and those familiar with Vagrant.
Will give it a poke with a few hundred dollars in Vanguard ETFs.
So, betterment (for example) offers something called betterment institutional where the advisor has to pay that same .1-.3% of AUM to provide those services to her clients.
This ends up costing the advisor hundreds of thousands of dollars every year.
Or an advisor could pay someone like (future) you, who's familiar with Vagrant and knows the wealthbot platform inside-out, to implement wealthbot.io at her firm for a 1 time fee.
The technology stack of this application gives me pause, if I am reading the included vagrantfile correctly: ruby and python and php; nginx and apache2; mysql and postgresql and sqlite and mongodb; redis and rabbitmq. Why so many overlapping choices? And I tend to think that the whole vagrant + puppet installation would be way faster and simpler just using docker.
the vagrant config is a little confusing at first glance.
note, this is a typical config file provisioned by puphpet ...
if you look closely not all of those packages are marked for installation. (install : 1/0)
so we only use a faction of those listed. a basic lammp stack, i guess + some necessary php extensions.
p.s. as to why all the entries are there i guess it was easier to generate a file with everything and enable/disable various tools as needed. i.e. i decide to switch from apache to nginx change apache isntall = 0, nginx intall = 1..
Does this hook up to my brokerage account and perform rebalancing and tax-loss harvesting a la Betterment/Wealthfront? It looks like it might, but with extra layers of complication to jump through first since I'm both pseudo-RIA and client. A step-by-step guide or "manage my own funds only" configuration would be helpful.
Yea, a bot that just runs your Vanguard account like betterment/wealthfront would but without their fees would provide a huge amount of value to people.
you can set it up to manage your own portfolio.
i.e. you can set yourself up as an RIA and a client of your own firm, the on-boarding process for both sides takes 45 min total. And if you are good enough with writing code you can script all your setup data (we have examples of that).. than setup is even faster.
Once that's done you can run the rebalancer on tolerance or quarterly (time-frame) basis to rebalance your own portfolio without any fees.
You'd only pay fees with your custodian if you decided to execute the trades proposed by the rebalancer.
"A Registered Investment Adviser (RIA) is an investment adviser (IA) registered with the Securities and Exchange Commission or a state's securities agency." [0]
"A Registered Investment Advisor is defined by The Investment Advisers Act of 1940 as a "person or firm that, for compensation, is engaged in the act of providing advice, making recommendations, issuing reports or furnishing analyses on securities, either directly or through publications." An investment advisor has a fiduciary duty to his or her clients, which means that he or she has a fundamental obligation to provide suitable investment advice and always act in the clients' best interests." [1]
When I got my first job after college I somehow stumbled upon Bogleheads.org after receiving an indecipherable 401k information packet and trying to figure out what to do. An invaluable resource, their wiki led me to the church of low-cost index funds.
And that's the story of how I realized my roommate had screwed me over when he convinced me to open a Roth IRA with him at Primerica with the money from my junior-year internship. >1.5% ER, 12b1 fee, front-load sales, the works.
He ended our friendship when I transferred the account to Vanguard.
You don't need friends or funds like that :) I always recommend low-cost index funds to anyone who asks, even though I'm no pro investor. It just seems like a pretty obvious way to not miss out if the market moves without risking much more than anyone else if it tanks.
I've been rebalancing religiously every quarter, sector-balanced low-fee mutual funds etc. Lifetime APY so far, 2.5% . S&P500 APY over same time period about 8.3% . Grumble.
Why is no one considering investing offshore? Is it really that risky?
I've seen some ridiculous returns on offshore funds. Have a look at some of the Southern African funds (though it does include non-SouthAfrican funds as well):
purely from a technical standpoint for wealthbot.io the challenge is acceptance of these securities by custodians.
for example our platform doesn't really care which security it works with whether it's a stock, and EFT or bitcoin it doesn't matter.
the problem is finding the financial custodian that will execute your trades using the said currency. we did have real interest in someone supplementing their portfolio with bitcoins... but we can't find a clearing house/custodian that would execute relevant trades for us.
if there is an international custodian that we can hook into to work with securities from other countries, it's a no brainer.
that's why open source wins. we are not restricted by any regulation or market conditions. if the technology exists and we can hook into it, it's possible.
Because the author was nice enough to provide a Vagrantfile that can easily spin up a box that gets provisioned with all the required software installed. Sure you could probably run it on your host OS, but why would you even want to bother with that?
definitely you can use your local OS to run it. if you have a full LAMMP stack ready, just setup a new vhost (or whatever your typical process is.. .and off you go).
(as a matter of fact, that's how it would be deployed in production).
however vagrant is perfect for local, since you need mongo and mysql and various php extensions, etc. etc. all of that comes pre-packaged w/ vagrant... so if you don't feel like littering your local with a bunch of libs that you or many not use in the future, use vagrant.
Aside from that, unless this has been vetted and audited by FINRA or a registered CRCP, the chances that any compliance officer (which every RIA is required to have), are virtually non-existent. I haven't dug into the platform to see what type of guidance you're offering/presenting, but you need to be really careful about what advice you give or state that you give. As in the US, anything even remotely related to any investment vehicle is highly regulated and providing guidance and advice without the required registrations, licenses and oversight can and will land you in very hot water, very fast.
All that said, I think with the right approach, something like this could be great for personal use as long as it integrated with multiple investment companies and could track and recommend based on all of them.