Tag Archives: financial advisors


When to Diversify Across Financial Advisors

Last month Wealthfront hosted an event that featured our chief investment officer, Burt Malkiel.  It’s wonderful to listen to Burt, because he discusses the markets with such clarity. Markets go up, and markets go down.  You can’t control them. As an investor, you should instead focus your efforts on the three things you can control that will make a difference:  Diversify your portfolio, minimize fees and minimize taxes. During our Q&A session, one of our clients asked Burt, “Does it make sense to diversify across financial advisors?” Burt’s answer was simple: “There is no real benefit to diversifying advisors if your advisor follows my advice of diversifying your portfolio across index funds that represent a variety of asset classes. Hiring […]

7702 Retirement Plan? There’s No Such Thing

A growing number of insurance companies and independent financial advisors have been selling “7702 Plans,” sometimes referred to as a “7702 Private Plan,” for retirement. On Google alone, a query for “7702 plan” results in almost 1.5 million pages of matches. This is fascinating, largely because there is no such thing as a 7702 plan. A vehicle for selling life insurance If you go to one of the thousands of websites, you’ll find a description of something that sounds like a 401(k) or IRA, but is based on life insurance. The page will explain that unlike traditional retirement plans like 401(k) and IRA accounts, “life insurance retirement plans” have no limit on contributions or size, and no requirements for withdrawals […]

Why Whole Life Insurance Is A Bad Investment

When you have children, many people tell you it’s important to buy life insurance to protect your family. You’ll have two options: Term Life Insurance. Term life is a life insurance product that covers a limited term in return for a constant monthly premium over the covered term. For someone who is 30 years old, premiums can be less than $75 per month. Whole Life Insurance. Whole life is a hybrid investment and insurance product that covers you until death. For someone who is 30 years old,  the premiums can be less than $800 per month, and they don’t change over the life of the policy.[1] Whole life insurance is a more complicated product than term life insurance. Like universal life or […]

Why Wealth Managers Have High Account Minimums

At a recent investing seminar at LinkedIn, a young engineer asked a question I’ve heard repeatedly over the past year: Why do Private Wealth Managers have such high account minimums? Financial advisors typically earn handsome livings, especially Private Wealth Managers who work for the big Wall Street firms. Those Private Wealth Managers can easily make $500,000. The top Private Wealth Managers make about $900,000, and that doesn’t include their recruiting bonuses, which often are in the millions. I don’t want to comment on whether this is justified. It’s just the market rate firms pay to attract people to the job, which in most cases means applying Modern Portfolio Theory to a client’s assets. If you assume an average Private Wealth […]

If ETF Fees Are Falling, Why Do Advisors Cost So Much?

In the last few weeks, there have been two new developments in the ETF price wars that are important to Wealthfront clients and investors in general – moves by Vanguard and BlackRock that will significantly lower ETF fees. At the same time, we’re starting to see the media raise the question that’s been on my mind lately: Why do traditional advisors charge so much when the underlying investment products (the ETFs) are getting cheaper and cheaper? Two weeks ago, Vanguard announced it will change the indexes it uses for 22 of its index funds and ETFs. For instance, it will now use FTSE for international indexes in place of its previous index provider, MSCI. Most people don’t realize the publishers […]

Do You Need A Private Banker?

A private banker is someone who focuses on the needs of wealthier-than-average clients. Sometimes, he or she works for a private bank within a large institution, like J.P. Morgan Private Banking; other times, his or her institution is a private bank, like U.S. Trust. Private banks used to exclusively serve people with millions of dollars in assets, but in recent years they’ve been broadening their services to appeal to people with somewhat less. After your company has an IPO or is acquired, you might get a knock on the door from a private banker. In this recent Quora post, Wealthfront CEO Andy Rachleff listed the pros and cons of using a private banker. Among the pros: A private banker might […]

Wall Street Ethics: The Vanguard Test

Last week, Susanne Craig and Jessica Silver-Greenberg of The New York Times wrote a smoking-gun story about the lack of ethics at JPMorgan Chase. “[As JPMorgan Chase] became one of the nation’s largest mutual fund managers, some current and former brokers say it emphasized its sales over clients’ needs,” wrote the duo. This is a surprise to people? For decades, the traditional investment business, aka “Wall Street,” has thrived on a hard-core sales culture, with a legal and ethical credo that amounts to buyer beware. Of course, it’s hard for buyers to beware in such a complicated business with so little transparency. Every few years, journalists and regulators rediscover the problem with Wall Street. In a follow up story to […]

Wall Street Invades Silicon Valley

How Wall Street Brokers See The Facebook IPO

Brokers around the country have woken up to the wealth being created by Silicon Valley IPOs and are busy plotting to get a share of it. One trade publication for brokers and financial advisors published a kind of “cheat sheet” on big Valley companies, which ends with the suggestion that brokers should become less like the Flintstones, and more like the Jetsons, to be able to talk to these new clients. Seriously.  We are not making this up. The idea that seeming tech-savvy can be learned from a 1970s cartoon – that will go over well in the Valley. Here’s the link. We don’t want to pick on the writer (much), but sometimes a detail is very telling. The reference […]

Does Your Financial Advisor Think You’re Clueless?

Wealthfront’s CEO Andy Rachleff published a column last week on Forbes.com about how this generation of IPO wealth may help transform the business of money management. It offers a sharp contrast to the attitude that many Wall Street brokers take toward their clients, which was obvious in an article that ran last week in the New York Times (more on that below). In Hey, Silicon Valley Engineers, Time To Toss Out The Bankers, Andy wrote: This era’s IPO wealth is being created by young, Web-savvy engineers who have a deep-set aversion to traditional, expensive ways of doing things. They also have a deep understanding of how to use the Web to manage all aspects their lives (and possibly yours – […]

Beware Rising Investment Advisor Fees

A few weeks ago, Wealthfront’s VP of Research, Jeff Rosenberger, PhD, clipped a story from an industry trade magazine, titled Five Ways for Financial Advisors To Raise Fees, and hung it up in Wealthfront’s Palo Alto office. We have to admit, it was subject to grafitti. Our team found the article funny. We were in the midst of an effort to lower fees on investment management – and here was an article offering financial advisors strategies for milking their customers. Not only are the traditional financial advisors looking to increase their fees, they are trying to charge more for what is too often bad service. According to an industry report last spring, financial advisors charge an average of 1.32% annually on the assets […]