Below is a copy of a Wall St. Journal article where I was asked about our usage of online investing site CoVestor.com
To view the original article requires a subscription, so the article is reproduced below.
You can also follow our investment model performance at CoVestor Ltd. here
Learning to Embrace Online-Advisory Providers
Some advisers see online rivals as friends, not enemies
By Murray Coleman
Growing competition from discount brokers and fund companies is leading many financial advisers to embrace developers of online-advisory sites, often considered a threat to their existence.
“If you don’t take advantage of some of the more innovative advisory services online, you’re basically burying your head in the sand,” says Ross Almlie, president of startup TCI Financial Advisors in West Fargo, N.D., with $37 million in assets.
As more players such as Fidelity Investments and Charles Schwab Corp. push into offering financial advice, traditional full-service planners need to look for better ways to get word out about their skills, says Bill DeShurko, president at 401 Advisor in Centerville, Ohio, with $50 million in assets.
“People appreciate the fact that we’ve learned to work alongside online service providers to create a better investing experience,” he says.
Mr. DeShurko, who says he has been in the business for 26 years and has watched closely the advance by online advisers, is partnering with Covestor Ltd. The Boston-based firm offers online portfolios run by professional money managers that individual investors can follow and invest alongside with.
It’s a service that allows advisers with strong track records of running private accounts to bring their portfolio strategies to a larger audience, Mr. DeShurko says. He has blended a few of his existing account strategies to develop portfolios at Covestor that require minimum investments of between $10,000 and $20,000 each.
“Instead of turning away business from people with smaller accounts, we can put them into our Covestor managed accounts,” he says.
Since starting to charge for its asset-management services in 2010, Covestor says about 80 of its 139 portfolios are managed by registered investment advisers. The others are hedge-fund managers and professional traders. All are screened by Covestor, says Asheesh Advani, the firm’s chief executive. On the company’s board is James Cornell, a former president of Fidelity’s private wealth-management unit and John Sinclair, ex-research director at Fidelity.
Mr. Advani says Covestor tracks hundreds of different portfolio managers and invites the top performers to be a part of its online marketplace. It splits fees with managers, who charge anywhere from 0.25% to 2% a year to run their portfolios.
Ex-mutual-fund manager Barry Randall has decided to use Covestor as his main avenue to market a technology stock-focused investment strategy. Now, he serves as the chief investment officer at Crabtree Asset Management in St. Paul, Minn., which manages about $800,000 in assets.
“I had experience managing portfolios, but no real background in marketing,” Mr. Randall says. “So this is a perfect match. It lets me focus on what I do best.”
Instead of setting up client accounts through larger players such as Schwab or Fidelity, Mr. Almlie of TCI Financial Advisors has decided to take much of his business to another new company, Motif Investing.
The online advisory service has built some 120 different baskets of stocks and exchange-traded funds that focus on different themes–from companies that can profit from health-care reforms to stocks trading with less beta, a measure of volatility.
Such bundles of securities can be molded to almost any investors’ personal preference. For example, Mr. Almlie says he has a client who is passionate about investing in drug companies that helped her to overcome breast cancer.
“She wanted a broad-based portfolio with a slice of cancer-fighting biotech stocks, but we couldn’t find the right combination through a traditional mutual fund or ETF,” Mr. Almlie says.
Each motif comes without management fees. Instead, those using its portal can buy a basket of securities for a flat $9.95. They can also add or delete individual stocks or ETFs inside each portfolio for $4.95 a transaction.
“We act as an online broker and provide the technology to let investors build their own portfolios around any theme they’d like to target,” says Hardeep Walia, the firm’s chief executive and founder.
Starting early next year, Motif Investing plans to offer a service that will let advisers build securities baskets for clients using their own existing trading and back-office systems.
“They’ll be able to use their own software to custom design portfolios and to control whether their motifs are made public or not,” Mr. Walia says.
Write to Murray Coleman at murray.coleman@wsj.com
