Updated: Mar 30
Commentary: Passive Investing Trends
In this post I'm reviewing the fees Goldman Sachs charges their Private Wealth clients. The information I used in the video came from a post on SmartAsset.com.
I'm Bill Woodruff, founder Chief Investment Officer at WealthFactor. Today, I've got a couple things I want to share specific to current trends in investing. I'll start it out with a little context in terms of what the market is from a dynamics and how dollars are invested. The biggest influencer in global financial markets and especially in the US, is passive investing. So as of 2019, passive investing approached 50% of markets, and that's up from about 25% a decade ago.
Per this article here, the CNBC piece, let me give you a little bit of perspective around that. So in the US stock market has a current value of approximately 34 trillion with 44 trillion being the total Global value of all stocks. And then I always find kind of keeping an eye on Vanguard, an interesting metric, how much AUM (assets under management) does Vanguard have, and they're approaching $6 trillion, approaching one seventh of all global stock assets, although I suppose that's multi asset class AUM so that's a little bit of an apples to oranges, analysis there.
What I would tie this to, is the dynamics of how investors are getting their investments. This article here is talking about the Robo-investment advice world. And it's highlighting how a variety of estimates put the AUM and Robo-investment advice by 2020 at much larger numbers. This was referencing this article, which is more recent references 2016 projection that says they'll reach AUM levels of $2.2 trillion by 2020. Well, we're in 2020, now and further in this article, it's estimating that there's between $350 - $660 billion in Robo-investment advice assets currently. As I am entering and starting to ramp up my attempts to grow WealthFactor, this really speaks to how I think about what the end investor wants, and should get from a service deliverable. So the robo-investment advisor is acknowledging that the investment elements, doing it right, whether that's passive in some way, or perhaps passive with some sort of tax, active tax management overlay, or perhaps even just a systematized tax management, that's likely the right way to do it, and it's something that a computer can largely do. It's commoditized.
But I think the fact that we haven't seen larger growth in asset levels in the Robo-investment advice world really speaks to the practical challenge of: there are a variety of service needs, not just the investment part, that are important. So I look at that in sharp contrast to what I call the mass advisor where they really haven't embraced technology for the benefit of the clients.
My goal at WealthFactor, what I think needs to happen is a modernization to take the technology and systems associated with delivering what is largely a commoditized investment and exposure and experience, to clients.
About WealthFactor: A Lake Oswego based investment adviser and wealth manager serving local high net worth and ultra-high net worth investors. Founded on the idea that high fees force unnecessary risks when providing investment advice. By leveraging the investment methodologies of the largest passive and rules-based asset managers, WealthFactor seeks to pass on the benefits that efficiency provides through financial technology on to its clients. WealthFactor offers custom investment advice services conveniently through separately managed accounts in each investor’s name. For more information visit www.wealth-factor.com.
About Bill Woodruff: WealthFactor’s founder has been investing in publicly traded financial markets for over 20 years. His career includes founding an alternative investment manager, launching and managing a mutual fund and serving as a managing director of a publicly traded investment manager. With over a decade of experience serving high net worth investors Bill skillsets uniquely blend an understanding of investor needs with an extensive financial markets and investing background.