Wells Fargo Tries To Reinvent Itself With Technology

As you may know, it has been a rough couple of years for Wells Fargo.

From opening millions of fake customer accounts to pushing sketchy investment products to charging customers for auto insurance they did not need, it has been one unethical move after another. Now, the big bank is undergoing a massive change in light of its shake-up.

Wells Fargo is phasing out human investment advisers in favor of an automated approach that slots client funds into what are effectively non-managed portfolio models. From what I gather this is the Wells iteration of a "robo" advisory service, similar to what the more pure robo-advisers like Wealthfront or Betterment offer.

I am no fan of these robo-advisers, although I do see the purpose they will serve in the future once many of the kinks are ironed out. Right now the robo-approach is a flawed first-generation technology. But as the technology improves it will become a sound option for small investors who have previously been without a good solution.

I do not think there is anything wrong with this shift that Wells Fargo is making away from human advisers (here is the full story). I think it does highlight three things though:

  1. It signals the direction where big firms are headed. It is becoming increasingly difficult for large investment firms to provide better and better value to clients over time, due to increased industry competition, particularly those companies that are saving money by replacing headcount with technology.
  2. It reiterates how vital it is that we as advisers are actually advising and managing portfolios, rather than sitting back and collecting a check or commission payment.
  3. It reinforces the need to conduct financial planning. Robotics will have a very difficult time comprehending and reacting to the human emotion that goes into personal finance. Part of the reason we focus so heavily on behavior is to limit the negative influences that emotions can have on your money decisions.

We manage client portfolios on a daily basis. If the market is open we are evaluating it, even though most of the time it does not result in any specific action. We are always available to help you plan, whether that means assisting you with a one-off financial matter or digging into a comprehensive plan.

In The Market...

The S&P 500 was essentially flat this past week. Let's look under the hood:

(price data via stockcharts.com)

Technically the S&P index gained +0.07% last week, but we will call it flat. It was kind of a weird week ahead of quarterly earnings announcements that are looming from the likes of Google, Amazon, Facebook, etc.

We are closing in on what has historically been the weakest time of the year for the stock market. Last year was pretty kind, as the S&P 500 fell only -2.0% before continuing its rally. The two years prior, 2015 and 2016 were much bumpier rides. For now though there is not much to update based on last week, but again, earnings announcements will change that soon.

In Our Portfolios...


What's New With Us?

We have been creating short informational videos on various investment and financial planning concepts. They will be available here on the site as we publish them. Here is one in which we explain everything you need to know about Restricted Stock ("RSUs").

Have a great week,

Brian E. Betz, CFP®
Principal