New products and services become obtainable to consumers on a daily basis without a human intermediary to facilitate their sale. We buy soft drinks, postage stamps and lottery tickets without a human being anywhere in sight, and it’s the norm.
This is acceptable in part because the stakes are low — if you put money in a vending machine, and the Zagnut bar doesn’t drop into the compartment below, it’s annoying, but forgettable.
This principle does not apply to everything. Take investing. If you press the “Apple” button on a hypothetical investment vending machine and it erroneously dispenses 20,000 shares of “Radio Shack” instead, you’ve got problems far exceeding a lost dollar.
Be that as it may, some financial service institutions have begun offering the services of “robo-advisers.” Traditionally, investment advice has been dispensed by a living human being, who would put a client’s money into whatever configuration of stocks, commodities or cash seemed appropriate in that particular case. Robo-advisers, however, forgo the human touch, and derive the entirety of their investment advice from an online form, filled out by the client.
Coins2Day decided to dive headfirst into this brave new world and use one of its own writers as the guinea pig. Namely, me.
One of the financial services firms at the center of this technological advancement is the Charles Schwab Corporation. Users who click the Schwab Intelligent Portfolios link are greeted by text proclaiming that “Investing has changed forever.”
As the user scrolls down, the next paragraphs get down to brass tacks. The service charges no advisory fees, commissions or account service fees, and is available to anyone with as little as $5,000 to invest. This puts Schwab’s service within the reach of a wider range of customers than firms that require investments of at least $100,000.
The Intelligent Portfolio also provides free automatic rebalancing, keeping investments consistent and tempering market volatility. This is not a small point, and it may be the thing that either wins or alienates potential customers. Novice investors may be attracted to the lack of guesswork, but more experienced investors may not want to leave these decisions up to an algorithm.
At this point, users answer personal questions. The first asks why you’re interested in this account. The choices are “I want to prepare for retirement,” “I’m saving for major upcoming expenses (education, health-bills, etc.),” “I’m saving for something special (vacation, new car, etc.),” “I need a rainy day fund for emergencies” and “I am retired and want income for expenses.” I chose “I need a rainy day fund for emergencies,” because as a professional writer, I will likely never make enough money to buy a new car, much less retire.
Users are also asked what how they respond to important financial decisions. The choices are, “I try to avoid making decisions,” “I reluctantly make decisions” and “I confidently make decisions and don’t look back.” I chose “reluctantly” because every financial decision, from buying movie tickets to paying the phone bill, causes me anguish.
As the user answers these questions on the right side of the screen, the left side shows a graphic called “My Portfolio,” which evolves with every submission. It depicts a circle split into four sections – stocks, commodities, fixed income and cash, and gains more detail as the user answers more questions.
At the last screen, the user enters his or her age, initial investment amount and goals for the investment. Based on my 45 years of age and fainthearted investment strategy, it hypothesizes that when I’m 80, my initial $5,000 investment will swell to $85,000 — 12 percent cash, 5 percent commodities, 29 percent fixed income and 54 percent stocks.
After that, users either press the “Sign Up” button or run away, and which one they choose depends very much on how much they trust technology to make financial decisions, even small ones. If they’re squeamish about it, this may not be for them. But if they have sufficient faith, this is a quick way for new investors to get their feet wet, or put the portfolio of the very experienced investor on autopilot.
Daniel Bukszpan is a New York-based freelance writer.
