Tag Archives: lending

Introducing Wealthfront 3.0

By Adam Nash When we launched Wealthfront in December 2011, the idea behind our first generation service was simple: take the best practices of investment management like diversification, rebalancing, dividend reinvestment and tax-loss harvesting, and automate them so investors could get these benefits without the high fees and high minimums of the traditional industry. The advent of low-cost ETFs and the relentlessly improving economics of consumer software made Wealthfront 1.0 possible. In December 2013, we launched Wealthfront 2.0. Our second generation service built a series of high value-added services that previously were only available to the wealthy, and layered them on top of our basic service. These innovative services include our Direct Indexing Platform, Single-Stock Diversification Service, and Automated Tax-Minimized Brokerage Transfers. No other automated investment service has yet been able to replicate any of these services. Today, we are on the cusp of something even bigger: the rise of artificial intelligence applied to financial services. We believe that over the next decade, artificial intelligence is poised to transform our industry. The entire fabric of the financial system will be rethought, redefined and rewired. In order to meet this future, we need to start building for it now. So I am excited to unveil the beginning of the next generation of Wealthfront – Wealthfront 3.0. Starting today, our clients will begin to see a new experience that lays the foundation for an advice engine rooted in artificial intelligence and modern APIs, an engine that we believe will deliver more relevant and personalized advice than ever before. We are building for a future where Wealthfront will be the only financial advisor our clients will ever need. Redesigning Wealthfront for the Future To deliver on this promise, our Vice President of Design, Kate Aronowitz , and her team had to rethink our entire client experience from the ground up. Our engineering team rebuilt our front-end architecture to display results based on original research from our world-class team . The result is an entirely redesigned Dashboard that will be the center of your financial life, from which all other services can plug into and provide you a complete picture of your net worth today and tomorrow. The first thing you will notice about the new Dashboard is a projection of your net worth designed to orient you towards the long term. You will see Wealthfront 3.0 come to life with relevant, data-driven advice each time you link an account or third party service to your Dashboard. Only Wealthfront provides recommendations on diversification, taxes and fees that are personalized not only to the specific investments in your account, but also to your specific financial profile and risk tolerance. Do you have enough cash in your emergency fund? Are you holding too much stock in your employer? Wealthfront will help you. Over 60% of Wealthfront clients are under 35, and not surprisingly, many of the financial services they use are built with modern APIs for direct integration. Wealthfront 3.0 will feature direct integrations with platforms like Venmo, Redfin, Lending Club and Coinbase as well as bank accounts and external brokerage accounts. Anyone who has ever registered for a bank or brokerage account provides their address, but with Wealthfront 3.0 that information is used to automatically integrate with modern services to give up-to-date financial advice about your home. Actions Speak Louder Than Words We’re firm believers that artificial intelligence applied to your actual behavior will provide far more powerful advice than what traditional advisors offer today. The reason is quite simple: actions speak louder than words . Observed behavior can’t be fudged on the phone or lied about in person. More importantly, observed behavior may reveal insights about ourselves that we aren’t even consciously aware of. Wealthfront has been built from the ground up with the same social contract that is at the heart of fiduciary advisor: our clients trust us with the relevant details of their financial lives and we keep their information private and secure. Our advocacy for a fiduciary standard is based on the premise that it will lead to far better advice and outcomes. We understand that many older investors who meet the high minimums of the traditional industry will continue to find more comfort in a personal relationship with a traditional advisor and we respect that. However, we are building our service for a new generation of investors, and designing it to grow with the profound capabilities we expect from intelligent services in their lifetimes. The Future Starts Today On March 9th, the world was stunned when Google DeepMind defeated legendary Go player Lee Se-dol . Over the next decade various forms of artificial intelligence will be brought to bear on every industry, including financial services. This intelligence will be built on modern platforms that translate data delivered by APIs into relevant advice. We believe the ultimate financial impact of artificial intelligence on society will be far bigger than what we are building at Wealthfront. These changes will not just impact the next few months or years, they will continue to accelerate over the next few decades. Over the next two months, Wealthfront clients will begin to see these features roll out progressively across our mobile and web experiences. A journey of a thousand miles begins with a single step, and today is just the first of many. One thing is certain. Artificial intelligence is the only way to bring high quality and low cost financial advice to the millions and millions of people who don’t meet the high minimums of the traditional industry. Welcome to Wealthfront 3.0. We’re just getting started. About Adam Nash Adam Nash, Wealthfront’s CEO, is a proven advocate for development of products that go beyond utility to delight customers. Adam joined Wealthfront as COO after a stint at Greylock Partners as an Executive-in-Residence. Prior to Greylock, he was VP of Product Management at LinkedIn, where he built the teams responsible for core product, user experience, platform and mobile. Adam has held a number of leadership roles at eBay, including Director of eBay Express, as well as strategic and technical roles at Atlas Venture, Preview Systems and Apple. Adam holds an MBA from Harvard Business School and BS and MS degrees in Computer Science from Stanford University. Disclosure Nothing in this article should be construed as tax advice, a solicitation or offer, or recommendation, to buy or sell any security. Financial advisory services are only provided to investors who become Wealthfront clients. Product screenshots and projected returns do not represent actual accounts and may not reflect the effect of material economic and market factors. Past performance is no guarantee of future results. Actual investors on Wealthfront may experience different results from the results shown.

Does The Rebalanced Barron 400 ETF Look Smarter?

The smart beta Barron’s 400 ETF (NYSEARCA: BFOR ) has made strategic shifts in its portfolio as part of the most recent semi-annual index rebalancing. The fund now seems to have superior fundamental attributes and be less susceptible to the current market turmoil due to increased weighting to the small cap stocks. Background of BFOR The ETF seeks to track the performance of the rules-based and fundamentals-driven Barron’s 400 Index. The benchmark uses the MarketGrader’s equity rating system to select America’s highest-performing stocks based on the strength of their financial statements and the attractiveness of their share prices. Notably, MarketGrader’s methodology assigns grades on a scale of 0-100 based on a proprietary combination of 24 fundamental indicators across growth, value, profitability and cash flow while it screens for size and sector diversification and liquidity. This approach has made BFOR superior to many other ETFs in the space with attractive fundamentals and growth prospects. The fund has been consistently crushing the ultra-popular broad market funds – the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) and the SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) – by wide margins. The fund gained nearly 23.3% since its June 2013 debut compared to gains of 20% for SPY and 8.9% for DIA. From the year-to-date look, the ETF is down 3.8%, which is better than the decline of 5.8% for SPY and 8.6% for DIA. Despite the strong performance, the product has not been able to garner enough investor interest as depicted by its AUM of $196.1 million. One of the main reasons for the unpopularity might be its expense ratio of 0.65%, which is one of the highest in the multi-cap ETF space. Further, it has a hidden cost in the form of wide bid/ask spread that increases the total cost of trading as it trades in a light volume of about 18,000 shares a day on average. Index Change and New Holdings During rebalancing of the index, sector allocation to the most beaten down energy sector was trimmed by more than half from 9.25% to 4%. Now, financials and industrials remain the top two sectors at 20% each. They are closely followed by consumer discretionary (19.25%), technology (13.75%) and health care (10.25%). In terms of security, 58 companies have found their way to the index and the ETF for the first time ever with the most notable names being GrubHub (NYSE: GRUB ), LendingTree (NASDAQ: TREE ), Blue Nile (NASDAQ: NILE ) and the recently merged Walgreens Boots Alliance (NASDAQ: WBA ). Some other big names that have been added to the holdings list are JPMorgan Chase (NYSE: JPM ), Verizon Communications (NYSE: VZ ), Altria Group (NYSE: MO ) and United Parcel Service (NYSE: UPS ). However, some marquee names such as Microsoft (NASDAQ: MSFT ), Facebook (NASDAQ: FB ), Wal-Mart (NYSE: WMT ), Celgene (NASDAQ: CELG ) and 3M (NYSE: MMM ) were booted from the portfolio. With these changes, the index currently has a total market capitalization of $18.28 billion post-rebalance versus $19.07 billion in March. The drop came on the heels of increased focus toward small cap stocks from 16% to 22%. Exposure to large cap stocks decreased from 27.25% to 25.5% while mid cap stocks saw a decline from 56.25% share to 52.5%. The fund currently holds 401 securities in its basket that are widely spread with nearly 0.25% share each. Bottom Line Though the new holdings suggest a modest change in the fund’s sector exposure, the reallocation to securities saw significant fluctuations in terms of market cap level. This is especially true as the tilt toward small caps suggests that BFOR will now be less exposed to the international markets, currently ruffled by China worries, a strong dollar and global slowdown concerns. As a result, the new portfolio now reflects increasing fundamental attractiveness of companies that earn the lion’s share of their profits in the U.S. The objective of the fund remains the same — offering quality exposure to investors seeking to stay invested in the broad market. The high quality stocks seek safety and protection against volatility in turbulent times and thus, outperform in a crumbling market. Overall, the Barron’s 400 Index and ETF seeks to take advantage of the improving U.S. economy with a heavy tilt toward the cyclical sectors and increased focus on small cap stocks. Link to the original post on Zacks.com

Where Will China Financial ETFs Go From Here?

The Chinese economy has been grappling with liquidity crunch for more than two years now. But the problem recently reached an alarming level. While high bad loan in a waning economy made it hard for the borrowers to repay loans, the surprise devaluation of yuan in mid August worsened the crisis. This led to net foreign exchange outflows worth 723.8 billion of yuan in August that crumpled the Chinese banking system. Chinese banks are on their way to see the worst year in 13 years, per Wall Street Journal. Most of banking bellwethers reported lackluster first-half performances this year. Some analysts including those of Moody’s expect Chinese banks’ profits to weaken further in the second half of this year hurt by piled up non-performing loans and fall in net interest margins. A plunge in fee income from stock-related services will also hit banking services hard as Chinese investments fell out of investors’ favor lately. Is There Any Hope? While the operating backdrop looks outright grim for the Chinese banks, a few recent developments could favor the bunch. First, despite the record monthly decrease in forex reserves, China had the biggest hoard of foreign reserves of $ 3.56 trillion at the end of last month. Added to this, the percentage of bad debt in total loans, though high from the last quarter, remained low by global averages. Moreover, after the summer slowdown and a scorching sell-off in August, Chinese banks are now trading at bargain. The price/book value of Industrial and Commercial Bank of China’s Hong Kong-listed stock is 0.8 times, reflecting a 72.4% discount from the level seen in 2009, per Wall Street Journal. Several other big banks are also showing the same downtrend. Of course this valuation pointer reflects bearish sentiments on these banking stocks. But on a positive note, it also indicates dirt cheap valuation for the Chinese banks. If this was not enough, the Chinese central bank appears to be going all out to infuse liquidity into the economy and cut rates and reserve requirement ratios (RRR), as it has done several times this year, to boost lending. China also relaxed the methods for computing the reserve requirement ratios of banks. Per the 17-year old rule, banks were required to tally their RRR on a daily basis. “Under the changes, banks can report a daily RRR that is up to 100 basis points lower than the rate set by the PBOC, but their daily average RRR in the assessed period cannot fall under the required level,” per Reuters . Per a report by Barrons.com , Nomura Securities approximates that this easing can free up to 1.3 trillion yuan, or 1% of total banking deposit. All these stimuli should result in higher lending which in turn should boost profits. Also, in August, total social financing rose 13% to 1.08 trillion and corporate-bond issuances more than doubled to 287.5 billion indicating that present activities may not be as bleak as it looks. In a nutshell, relentless efforts by policymakers to boost loan growth and compelling valuation should stage the backdrop for China ETFs with heavy allocation to the financial sector, at least for the near term. Since no one knows what’s exactly cooking up behind the Great Wall and how long does it will take the country to return to top gear, caution needs to be practiced while playing these products. Investors should note that the core China financial ETF, the Global X China Financial ETF (NYSEARCA: CHIX ) was one of the best performers in the China equities ETFs space in the last one-week, four-week and one-year periods (as of September 15, 2015). So, we highlight two finance-heavy China ETFs which have bottomed out and could turn around in the coming days. After all, China shares have been trending higher in recent sessions after a bloodbath and financial ETFs could very well cash in on this rising trend: ETF Plays Global X China Financial ETF This ETF provides concentrated exposure to the financial segment of Chinese equity market by tracking the Solactive China Financials Index. In total, the fund holds over 40 securities in its basket with the top three firms – China Construction Bank ( OTCPK:CICHF ), and Industrial & Commercial Bank of China ( OTCPK:IDCBY ) and Bank Of China ( OTCPK:BACHY ) – dominating the fund’s returns at more than 9% share each. It is a large cap centric fund accounting for 85% of assets. The fund has amassed $54.1 million in its asset base while trades in moderate volume of 150,000 shares per day on average. It charges 65 bps in annual fees and expenses. The fund is presently trading at a P/E (ttm) of 7 times, suggesting an appealing valuation. The fund was up about 9% in the last one week (as of September 15, 2015) and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. iShares China Large-Cap ETF (NYSEARCA: FXI ) This is easily the most popular China ETF in the market, as over $5.7 billion is invested in the fund and average daily volume is over 30 million shares a day. The 51-stock product puts half of its weight in the financial sector. This means that any news out of the financial sector can have a huge impact on the overall return of this famous ETF. China Construction Bank Corp, Industrial & Commercial Bank of China and Bank of China Ltd. are among the top-five holdings. FXI charges 74 bps in fees and has P/E (ttm) of 9 times. The ETF added about 7.2% in the last five trading sessions and has a Zacks ETF Rank #3. Link to the original post on Zacks.com