| I too have worked at a roboadvisor and to my understanding (as an engineer, not a financial advisor), its advice was more complex and useful than how you describe Wealthfront works. I haven't personally used Wealthfront so I'm not as familiar with what it does specifically. > "variable mix of index ETFs based on a 15 question survey" is not as much of a gamechanger as the roboadvisor's tout. I agree that if that's all your roboadvisor is doing, it's a bad roboadvisor. You point out a wide range of other financial advice people need. The thing is, quite a lot of that is possible algorithmically. > Figuring out how loan refinancing can reduce debt burdens long term You can absolutely do this algorithmically, and Credit Karma's offering is already moving in this direction, if it's not already there. > Figuring out how to contribute to their kids future education expenses If this gets into "how do I change my current spending and income to be able to contribute to my kids' education", you're right, that's not something that fits into the algorithmic model easily. > Figuring out the size of an emergency fund you need Not difficult get a reasonably good outcome here with a questionnaire. > Figuring out a reasonable living budget based on income and debt Agreed, this becomes similar to the education bullet point above. YNAB is a much better example of how to solve this with a software product. > Figuring out how to maximize tax burden through a combination of 401K, IRAs This fits into a roboadvisor's model reasonably well, right? (Although they likely can't make money on the 401K part without being the employer's 401K provider.) > Figure out how to get tax savings once you hit income limits on IRAs Is this so different from what TurboTax does algorithmically? (Depending on how fancy you want to get with the tax savings). You've made a great argument about the original point you made that I challenged, and convinced me. Where we may differ is that I see a large number of corollary services that a roboadvisor could offer that together would be substantially more useful than a glorified target date fund. |
At the end of the day it's not a roboadvisor but it's a robo allocater. Frankly asset allocation isn't a hard problem, I've been doing it manually for years.
> Is this so different from what TurboTax does algorithmically? (Depending on how fancy you want to get with the tax savings). Turbotax does not do this at all. It just fills in your tax forms. It does not advise you on tax strategy. To give an example, I'm gonna assume that since you are/were a roboadvisor software engineer, you are most probably out of the income limits of a roth IRA or IRA. If so, did you ever have TurboTax suggest you to do a backdoor roth when filling out taxes? I've filed taxes with TurboTax and I've never them suggest that (not saying they couldn't). My human CPA did though :)
I think your other objections are that automation could do this work. I totally agree. In my original response, I called out that this work could be automated. So yes, I agree in theory that fintech could do this, and I wish they would. But in my viewpoint, I actually don't see this happening. Specifically a lot of the challenges for everyday Americans finance wise are not profitable to serve.
The point I'm making is that a lot of fintech players like to play this marketing game where they are helping out the "common" man against Wall Street with super "sophisticated" products. In my view thats largely marketing, the products are are not very sophisticated and they aren't interested in serving the common man since they can't make easy money off of them.