Covestor Flips the FA Industry on its Head
While the financial services industry has struggled to keep its head above water: distracted by bankruptcies, disastrous returns, government regulation and employee attrition, a start-up called Covestor.com has been building its user-base, refining its products and beta testing its newest breakthrough CVIM product. Covestor’s goal: to empower the individual investor and level the playing field with the wire houses, all in a transparent, accessible and fair environment. In my opinion, the CVIM platform will forever change the financial services industry.
CVIM is a retail multi managed account or MMA. It offers individual investors access to talented individual and professional money managers, allowing the individuals to automatically trade alongside the professionals. Trading through an online broker, the model cuts out many of the fees associated with actively managed mutual funds while at the same time creating an empowering, transparent, accountable and fair environment.
Investors must have a TD Ameritrade or Interactive Brokers account and a CVIM account to participate. Once complete, investors begin by filling out a questionnaire designed to determine suitability and risk profile. Once this process is complete, the console recommends “suitable” investing models that the investors may wish to follow. In order to protect clients, CVIM screens trade activity and restricts client investments to stocks and ETFs
- Traded on US Markets;
- With a market cap of greater than $50 million;
- With a minimum daily trading volume of 10,000 shares;
- With no pink sheets
While traditional money managers and brokers are struggling to define fiduciary and explain the difference between SEC regulation and FINRA, CVIM is completely transparent regarding its relationship with the money managers, how the money managers are compensated and how Covestor is compensated. Covestor is a fee-only Registered Investment Advisor, charging between 0.5 and 1.5%. For a complete pricing guide, click here.
One big difference between the CVIM fee structure and a typical fee-based advisor is that the fees are only calculated on the money invested in the models, and not on the unallocated portion. Furthermore, there are no hidden fees or exit fees as are typical with a traditional mutual fund.
You may lose clients as a result of this product’s ability to cut out your role as a middle-man between investors and actively managed mutual funds. Many of your clients are already skeptical about the financial services industry and are accepting more and more responsibility for their finances and are looking for transparent alternatives to traditional financial advisors.
However, if your returns are good and your strategies sound, I recommend partnering with CVIM and licensing them your real time trading data. Not only is it another revenue stream for you, but you will likely gain clients as a result of the publicity and marketing.
Regardless of your view, products like CVIM are here to stay and are changing your potential revenue streams and the way you compete for business. Keep Covestor on your radar because they are likely to continue developing innovative products that will affect your business.
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