Personal Injury Law

Covestor & kaChing ? Will Their Kung Fu Be Stronger?

By Rod Heggy

Investment News posted a story by the Associated Press reporting a trend in which the investor retreats from RIAs and traditional brokers, and then goes to an online source to learn about money managers. Next, the investor can select one or a group of professional money managers to track. Finally, the investor opens an account and in the account the same trades made by the manager are made in the investor?s account. The fees for this service are about the same as the fees for mutual funds.

While this type of program might be better than no advice at all, and it might be better than searching Schwab?s or Fidelity?s website for user friendly advice, it is hard to see how it would compare favorably to the services of RIAs, brokers or CPAs. Admittedly, finding a qualified RIA, broker or CPA is not an easy chore.

Sitting in a room with a human the demeanor of whom you can evaluate along with an evaluation of their advice is something you cannot do with a website. As wonderful as the web is, it is artificial and regardless of the simulation, it is not yet intelligent. Risk assessment, the core value of financial advice, is sometimes as much a product of experience as it is knowledge.

The essential flaw in the advice of many RIAs, brokers and market predicting CPAs is usually inadequate risk analysis. The opportunity to remotely track money managers and copy their trades does not actually address this deficit, but merely wishes it away. It also assumes that the internet window is sufficiently transparent to permit assessment of character and philosophy without interpersonal contact.

Full post as published by Terra Extraneus on December 15, 2009 (boomark / email).