Articles Tagged with robo advisors

Chicago-based Stoltmann Law Offices is investigating cases where investors have suffered losses from “robo-advisors.” In recent years, the rise of robo-advisors has been dramatic. These highly automated platforms will not only recommend securities and mutual funds, but create entire portfolios online or through a do-it-yourself (DIY) phone app.

The convenience and speed of making trades on your smartphone, however, doesn’t always reduce the chance that you’ll lose money. Many of the algorithms used to push securities don’t pay close attention to personal risk tolerance and are often loaded with hidden fees. And many robo accounts may automatically funnel customers funds into cash accounts, which are a money-losing proposition when you account for inflation.

The mega-brokerage Charles Schwab, which operates one of the largest robo platforms (Intelligence Portfolios), recently disclosed that it will take a $200 million charge in the second quarter regarding the U.S. Securities and Exchange Commission’s (SEC) probe into its robo practices.

AdobeStock_17723177-1-300x175Robo advisors have a duty to have an infrastructure and platform to ensure their clients can trade. This duty is heightened during times of market volatility. According to Financial Planning magazine, Robo advisors Wealthfront and Betterment, crashed as the market plummeted on Monday. Customers allegedly had trouble logging on to their accounts. Robo advisors make it simple for customers who want to trade and obtain investment advice from advisors without speaking to human ones. Wealthfront and Betterment, two of the largest robo advisor’s, crashed on Monday as the US stock markets witnessed their largest decline in over six years. Betterment manages over $10 billion in assets, while Wealthfront is competitive. Both websites claimed the crash was due to “particularly high volume.” Robo advisors entered the markets soon after 2008 and the crash of the market, and analysts wonder whether these websites could survive a correction. Also impacted by Monday’s market troubles were T Rowe Price, Vanguard and TD Ameritrade. If you suffered losses because of an inability to use your robo advisor account, you may be able to recover those losses on a contingency fee basis.

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