Wealth advisor Condor Capital Management is taking a hard look at robo advisors. The Martinsville, N.J.-based independent RIA is using its four-member research staff to put together an in-depth review of how different robo advisors are performing.
But such a benchmarking system, which uses specially-designed algorithms to collect information, isn’t just seeking to crunch market data. The firm’s analysts are also tracking portfolio construction strategies and quarterly trading patterns for more than a dozen major robos.
“We see this as a service to help benchmark a part of the investment market which up to this point has been operating in somewhat of a black box environment,” says Michael Walliser, executive vice president at Condor Capital, which manages about $875 million.
Advisors and their clients can usually find “basic information” about robo investment philosophies and portfolio features at each service’s website, he admits. But Walliser finds a void in tools that actually track portfolio moves and compare investment choices across robo platforms.
“We’re trying to lift the veil and see what different robos are really all about,” he says.
The firm’s benchmarking research is offered free. Downloads of the first study covering three quarters of 2016 can be obtained through Condor Capital’s site. The next set of data covering the full year is set to be released in late January. Regular updates are planned on a quarterly basis.
“This is a service we’re providing to help inform people about how robos are actually managing their money,” Walliser says. “We’re not looking to make any money off it – this is just an extension of what our research staff is doing in analyzing funds and other investment options for our clients.”
Martin Leclerc, founder of Barrack Yard Advisors in Bethesda, Md., sees such data as a way for financial planners like himself to remain proactive in understanding a fast-evolving market that’s attracting a lot of buzz among young professionals and affluent millennials.
“If for no other reason than to help answer questions and show what value a human advisor can add, this is something that really needs to be done,” says Leclerc, who manages about $67 million.
The initial benchmarking report through Q3 finds Schwab coming out on top in equity performance. In fixed income, SigFig’s robo bested the field. Overall, Schwab’s free robo is listed as the early winner.
“These are very short-term results, so we’re not telling anyone to put a lot of significance on the raw performance numbers,” says Ken Schapiro, Condor Capital’s president. “The importance of this first report is to simply document how differently each robo works. As time passes, we’ll be able to develop a more complete database to get a better idea of longer-term performance comparisons.”
The Q3 report only ranks results in taxable accounts. Performance breakdowns for individual retirement accounts – separate from taxable investments – is coming in future quarterly benchmarking efforts, according to Schapiro. “We just don’t have enough data to do a full-scale IRA report yet,” he says.
The report card is already evaluating robo performance by asset classes. For example, in the Q3 report, Schwab’s free online investment service produced total equity returns of 12.5%. Meanwhile, rival second-best Acorns generated 11.1% and No. 3 Personal Capital came in at 9.7%.
In purely bond allocations, SigFig returned 9.8%. That was followed by Schwab’s 9.4% and Personal Capital’s 7.7%. In total, Schwab had 10.2% combined portfolio returns over the year’s opening nine months. Next best was SigFig’s 9.3% and Personal Capital’s 9.1%.
To standardize data, the wealth manager’s analysts try to answer questionnaires in a way that creates relatively balanced allocations of around 60% stocks and 40% bonds on each platform.
To be more precise, the report does list exact allocations studied for each robo. “We’re trying to be as transparent with our research as possible,” Walliser says.
Some bloggers have been trying to keep up with robo data in a more ad-hoc way, observes Sean McDermott, an analyst with Corporate Insight in New York. “But this sounds fairly unique,” he says. “It could turn out to be a good resource for advisors and their clients.”