Recently, the U.S. Senate held hearings on new rules to make retirement investing safer for all Americans. These proposed standards require financial advisors to act in the best interest of their clients and to disclose the real cost of the investments they recommend. Managing Director of Rebalance, Scott Puritz, is a nationally recognized authority on retirement investing and was asked to provide the Senate with expert testimony on the subject.
Senator Al Franken: Mr. Puritz offers his clients asset management, custom investment portfolios for IRAs and offers one-on-one consultation, all while embracing the fiduciary standard, and he charges some of the lowest fees in the industry.
Senator Al Franken: So how are you able to provide your service at such a low (fee)? My computations…32% of 2.3% is about 0.75%.
Mr. Puritz: That’s correct.
Senator Al Franken: How do you do that?
Mr. Puritz: We use technology to make everything that we do more productive. We use exclusively low-cost ETFs, index funds…
Senator Al Franken: Is that what was called, disparagingly, I think, “robo”…?
Mr. Puritz: “Robo” is a phrase for a new generation of investment advisors who use technology. Now there are some advisors who are 100% computerized, and that’s where the term “robo” comes from. There are some very successful ones, including Wealthfront, the market leader, and they’re really targeting millennials and people in their 20s and 30s, for whom…
Senator Al Franken: They’re familiar with working…
Mr. Puritz: …they’re familiar with computers, and their retirement is a relatively a small part of their overall life. Their whole career is ahead of them.
By contrast, there are other firms, such as Personal Capital and my firm, Rebalance, where we have similar investment philosophies and similar use of technology, but we have real, live investment advisors who deal extensively with clients and match them with the right asset allocation, low-cost underlying portfolios, very low cost, and disciplined rebalancing, which is really an essential risk management and return tool.