Online Advisor Bucks the Trend; Offers Actively Managed Portfolios

Online Advisor Offers Actively Managed PortfoliosOne unmistakable trend in the financial advisory industry has been the rise of so-called “robo” advisors. These web-based financial advisers employ computer algorithms to provide “personalized” investment advice based on the answers investors provide to an online questionnaire. The robo-advisor’s recommendations are designed to address the particular investor’s objectives, but with little or no human intervention, thereby keeping costs down.

The problem with robo-advisors, according to Schreiner Capital Management (SCM), isn’t their lack of human touch, but the fact that other robo-advisors have only offered access to passively managed, buy-and-hold portfolios – until now. Early in 2015, SCM became the first online advisor to offer access to actively managed portfolios with the launch of its ALTS Investor Wrap Program. The program’s website can be found at

“Passive or buy-and-hold investing might seem like a good idea when markets are strong, but when markets crash, passive investors get hammered,” said Brian Schreiner, president of SCM, in a statement earlier this year. “Today’s markets demand alternative investments.”

Low Minimum and Low Advisory Fee

For investors with at least $100,000 to invest, SCM will actively manage a portfolio designed to achieve the investor’s unique investment objectives. The only charge to investors is a 0.5% management fee – there are no trading costs or commissions. After filling out an online questionnaire intended to determine the investor’s objectives and risk tolerance, SCM provides automated investment advice – but clients are also given a direct line of communication to a licensed advisor and client-service representative via phone and email.

“Our online service seeks to provide investors with the best active and alternative fund managers for one low fee,” Mr. Schreiner said. “We select the best-suited mutual funds for an investor’s objectives and risk tolerance, and we monitor their portfolios ongoing, making changes when necessary.”

Although alternative investments underperformed in 2014, their proponents argue that alts are supposed to have low correlation to the stock and bond markets, both of which have been in multi-year bull markets. Now, with the Federal Reserve seemingly poised to begin raising interest rates, and with stocks at stretched valuations, 2015 could be a big year for alternatives.

Surprise, There Are Critics!

Nevertheless, SCM’s new ALTS Investor Wrap program has drawn criticism from active-management naysayers. Ric Edelman of Edelman Financial Services rhetorically asked InvestmentNews, “Why someone would feel motivated to build a site that allows people to do online what hasn’t worked offline?” Mr. Edelman also colorfully added, “I don’t know any online advice platforms that use active management, but I also don’t know of any bakers that add cyanide to their cupcakes.” Not sure if time will ever tell us who is on the right side of this long-standing debate, but now investors at least have a choice.

Mr. Schreiner says he doesn’t expect SCM to make a lot of money from its new service right away, but he thinks being first to market may prove advantageous. “Our overall advisory practice is already profitable, so we’re looking at this as a new line of service for our business,” he said.

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