Like many of you, I have been keeping an eye out there on the Robo Advisor movement.
They say that Robo Advisors will be putting some pressure on fees. This may be true. Who Cares? What is the value? What is it worth? Here is what I am wondering. Is Gravity Capital Partners the only Robo Advisor that is talking about performance?
Over the course of my career, I have never wanted to do something cheaper. I want to do it better. In the investments management industry, better always reduces to one thing; performance.
In the early days of the internet, you would see start-ups vying to be the online version for some niche. XYZ + .com model…. Pets.com anyone? Sometimes migrating a business online makes the business better. But in the case of investment advice, it makes it much worse. Investors suffer from the behavioral demons of fear and greed. There is no indication that moving advise online will do anything but facilitate investors succumbing to these demons.
We think having a professional investor involved as a behavioral / emotional buffer is clearly in the best interest of investors. Hence, certainly in the best interest of the industry.
The real purpose of robots in the investment industry is not to hold hands… people do that. Robots do what robots do; process and organize complex data that is beyond the abilities of humans. Gsphere.net is our Robo Advisor and it is not designed to compete, but to complement human advisors. It is designed to perform. We still think that is important.
The best investor in the world is not Warren Buffet. It is a guy named Jim Simmons. His company is called Renaissance technologies. Yes it is a technology company. Maybe it is the original robo advisor. Buffet produced returns of 22 percent annually for 40 years. Simmons produced returns of 35% for 25 years, a more improbable accomplishment… this is after charging 5% management fee and taking another 35% of the profits. This is the use of robots.