Domo Arigato Schwab Roboto

Schwab unveiled its Schwab Intelligent Advisory Service last week without much fanfare. Maybe because they already have a robo advisor platform? Many clients and advisory firms currently use Schwab Institutional Intelligent Portfolios – the latter using the service with smaller clients that have minimal investing needs. This new service is a little different though. The new service is a direct competitor with Vanguard’s Personal Advisor Service and offers an automated “financial plan” overseen by a CFP. While many advisors (especially advisors on the Schwab platform) see this as a potential threat to their business, the truth is that this is a boon for any true proponent of financial planning. Just as we have seen with the tax preparation industry over the past few years, as technology progresses it replaces flesh and blood (and brick and motor) providers of minimal services. For individuals with a W-2 and a mortgage (most Americans) preparing taxes was once a complicated process. Individuals also had to overcome their FEAR that they were missing something on their tax forms. In truth, these individuals were paying tax preparers a premium to know how to prepare taxes. There is not a lot of specialized knowledge to be applied to those returns. The people that need a true, certified professional to prepare their taxes will have high incomes, complicated equity structures, or business interests. By providing a low cost alternative to a flesh and blood preparer, companies like turbo tax have separated the wheat from the chaff, so to speak, and forced many “amateur” tax professionals out of the market. For persons needing more complex tax advice the odds that they will work with a highly trained professional have increased. The financial planning industry also faces a similar problem. Essentially, individuals that need a skilled financial planner run the risk of working with a salesman claiming to be a planner, while others that have basic planning needs are likely overpaying for service. The Schwab platform has an account minimum of $25,000. The average American couple cannot afford to pay a planner’s hourly rates and often end up choosing to work with a broker that won’t charge them separately from their assets. Because they also don’t have substantial savings they then end up overpaying for investment advice with large commissions going to the “advisor.” I haven’t personally reviewed the platform in detail so I can’t say for certain that this is a good choice for the average American family. But if it’s not, it at least signals progress towards a future where every family has access to affordable, professional financial advice that is free from conflicts.

Trading Floor for Sale

The once extravagant trading floor in Stamford, CT went up for sale. It will likely sell well-below market value, I assume because it’s slightly used? The idea was to lure firms away from New York and specifically attract Swiss Bank Corp. It went…poorly. Built in the 90’s for a staggering $149.4 million it may sell for as little as $64 million. I don’t thinks it’s on Craigslist yet but thrifty buyers may want to hold out until then. I’m not sure what one does with a 712,000 square foot former trading floor but I’m hoping the buyer turns it into a money vault a-la Scrooge McDuck. Interestingly, according to Disney, McDuck’s vault is three cubic acres. Discriminating readers will point out that an acre itself is a measure of area…meaning a “cubic” acre would technically have a fourth dimension. It’s best not to spend too much time on that thought. Mostly because it’s a cartoon so, you know, who cares? Obviously, I was not a “fun” kid to watch cartoons with. I’m personally hoping bondholders band together to purchase the building to drive the price up. The mortgage was made in 2004 and subsequently converted to mortgage backed securities. When the building sells it will be a sad day for these investors. I know, I know, they would still lose a ton of money in that transaction but it just sounds fun to me! This sort of reminds me of the Fannie Mae, Freddie Mac argument. Original investors have argued, now that the lenders are profitable, their shares should be reinstated. This is the equivalent of the trading floor selling in another 20 years as, I don’t know, an indoor football field? Then the original investors could come back and say, “Give us our money we lost!” It doesn’t work here and it doesn’t work for Fannie and Freddie.

Trump!

On Thursday Donald Trump stated in a, not-at-all frightening, response to Russia’s ratcheting up of Nuclear capabilities, “Let it be an arms race. We will outmatch them at every pass and outlast them all.” So…I don’t want to spend a lot of time on that but I do want to point out that he may be incorrect about “outlasting” anyone in a nuclear arms race. I’m not sure he knows where the “finish line” is in that scenario. This makes me think of that old Looney Tunes cartoon where the man drinks poison and blows himself up, first stating, “I can only do this trick once…” Anyway, Trump’s comments put Sean Spicer in a tough spot. When asked about the statement on the “Today” show he stated, “I think the point that he’s making is we’re not going to sit back as a country and allow other countries to expand their nuclear capability, with the U.S. just sitting idly by. Other countries need to be put on notice.” In four years, I would really like to hear a mash up of all the times Mr. Spicer says, “I think the point he’s making…” It sounds like a really enjoyable time, listening as his spirit and enthusiasm slowly deteriorate over the course of the presidency. Not to say there isn’t value in Trump’s statement, it’s just that he’s got a certain…track record…for saying things that worry people. Something tells me the White House press secretary will find himself trying to turn the President’s comments into something more PC more than once over the next four years.

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