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

1. Traded on US Markets;
2. With a market cap of greater than $50 million;
3. With a minimum daily trading volume of 10,000 shares;
4. 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.

No longer is investment performance the most important factor in determining overall satisfaction with an advisor.  In fact, investment performance accounts for only 15% of overall satisfaction, compared with 24% in 2008.  Alternatively, the financial advisor himself is now the most important factor, comprising 30% of investor satisfaction; increasing from 22% in 2008.

What does that mean, the “financial advisor himself”?  It means that investors value reassurance, guidance, management of their expectations, clear explanations, transparency and improved communication.

According to David Lo, director of investment services at J.D. Power and Associates, “During 2009, 20% of investors say they haven’t been contacted enough…up from 15% in 2008.”

Fortunately, there are so many great technologies and products out there to help you stay in touch.  A few of my favorites are ProducersWeb, StoneRiver Emerald and a start-up called Boulevard R.  Of course, there is also our YoungInvesteneur Newsletter which you can now market test for free!

I know these products cost money and I know times are tight, but your client’s preferences have shifted and you can really differentiate your brand by ensuring they are satisfied.  Think about it.  Wouldn’t you rather your clients demand weekly or monthly phone calls or newsletters as opposed to guaranteed returns?

- American’s have amassed $10.5 trillion in mortgages and $2.6 trillion in consumer debt.
- During Q3 2005, American’s spent nearly 1% more than they earned.

Clearly, compound interest and the satisfaction of saving are not enough to entice Americans. On the other hand, American’s spent $92.3 billion on legalized gambling during 2007 while only saving $57.4 billion.

With these insights in mind, Harvard Business School professor Peter Tufano has devised a program called “Save to Win”. The idea is to encourage savings by pairing slightly lower than market interest rates with the chance to win lottery-style prizes. Currently, the program is being tested in eight credit unions across Michigan.

Put $25 into a “special one-year CD” and qualify to win prizes of up to $400 per month or up to $100,000 in an annual jackpot. In the first 25 weeks, the program has attracted $3.1 million in new deposits.

If this concept takes off as it appears that it will, banks could have a new “option-like” product to market to customers, with varying interest rates, payout options and duration based on risk tolerance.

Ratings were assigned based on the following categories: Account Service, Website, Phone Service, and Personal Service.

Topping the list of brokerage houses was USAA with a score of 92 out of 100. Vanguard finished second followed by Edward Jones, Schwab and Scottrade. Banc of America, Morgan Stanley, Smith Barney, Wachovia, Ameriprise and Merrill Lynch all scored in the mid to low 70s with only average ratings across the board.

The complete list of rankings is below.

A third solution has recently hit the market, utilizing the incredible power of Web 2.0 technologies. A company called iThryv has launched a platform that fully integrates into your existing website and offers all the benefits of customization and differentiation with none of the drawbacks of building your own solution.

The iThryv platform has plug-in components as well as additional customizable widgets which adds desired functionality. In addition to the financial institution’s ability to customize solutions for its clients, the clients themselves can customize their user interface. Users have unique needs and interests and can tailor their experience with iThryv’s platform to meet those needs and interests.

In addition to creating superior banking functionality, the iThryv founders have incorporated financial education into their platform, believing that the point of a transaction is the best teaching moment. Because various age groups require different levels of sophistication, iThryv has created three different categories of educational materials: targeting 5-11 year olds, 12-17 year olds, and 18-24 year olds. Examples of financial literacy tools include differentiating between needs and wants and offering “savings scores” which rate how effectively the user is saving and budgeting. Additionally, one of my favorite tools is the “make $” section, which offers kids and young adults sample business plans in order to guide them toward entrepreneurship. An example is how to start and run an eBay business.

The bottom line for financial institutions is that they are able to develop loyal and educated clients by utilizing the iThryv platform to tailor the user experience and differentiate their brand.

And if that was not enough, iThryv also offers curriculum software to schools in order to promote and teach financial literacy. The software is free and is often sponsored by local financial institutions, creating another win-win as the institution promotes its brand and commitment to the community.

The iThryv platform is definitely the future of banking. It is extremely exciting to see what products and services they add to their platform as they grow.

In fact, Prince & Associates, found that 15% of the wealthy had left their main advisor last year and 70% had pulled some of their money away. Furthermore, a survey of “rich Americans” by the Harrison Group found that 63% had lost faith in financial institutions.

These statistics are in the past, so let’s turn to solutions in order to gain back the trust of the investing community.

Many have suggested that a transparent fee approach is key in the reestablishment of trust.

However, I believe that transparent fees are only one part of the solution. The underlying mechanisms of the solution must lie in customer education. Customer education not only means transparent fees, but also education of the products, strategies and risk-reward tradeoffs.

A new kind of relationship between the client and the advisor in which the client actively participates in the decision-making process and understands the implications of various portfolio decisions.

We know that now is not the time to significantly increase expenses on consumer education initiatives.  However, inexpensive tactics like email newsletters, regular blog posts or personalized educational presentations are sure to impress clients, build loyalty and educate all at the same time.

Investors will not quickly forget the deceit. Furthermore, you cannot control the actions of the other advisors, who believe that cheaters prosper or that they can “beat the system”. However, what you can control is the financial knowledge of your clients. Those educated clients will understand the soundness of your advice, regardless of the mistakes of others and regardless of the natural fluctuations in the markets.

The results of the survey are astonishing and indicate that financial advisors are missing a significant opportunity to leverage intergenerational referral business. By simply offering financial literacy materials, financial advisors will be able to significantly increase their intergenerational referral business, thereby building a loyal customer base and ensuring the steady flow of future business.

To view the complete results of the survey, click here.

While avid individual investors are likely managing their own money, younger investors try out these technologies, but unfortunately most do not understand the portfolio management strategies or risk-reward tradeoffs to utilize the tools to their potential. Finally, professional financial advisors can utilize these sites in order to build confidence in investment ideas, locate better options for their clients and for effectively compete with the large wire houses who have spent millions to develop proprietary software to accomplish the same objectives.

Here are a few of the most innovative in each category.

1. Investing and managing money

The contrarians are laughing all the way to the bank, but many investors follow and duplicate the investments of professional analysts and financial veterans like Warren Buffett.

Sites like Covestor.com allow you to share investment ideas, exchange market research and track peers’ investment performance. One major advantage to investors is that they believe that they are receiving objective advice, unbiased by commissions.

A similar site, CakeFinancial.com, offers a tool that looks at your current investments and finds similar potential investments with lower fees and expenses.

Finally, PortfolioMonkey.com offers a tool that helps calculate the correlation of positions in your portfolio based on historical performance. Additionally, you can add stocks to a sample portfolio to see how adding them might affect your overall performance.

2. Creating a Financial Plan

While there are budgeting sites like Geezeo.com and Mint.com, there are also now websites that help users create a complete and complex financial plan.

While some use these sites to complement their financial advisor, others use these sites as a substitution.

For example, SimpliFi.net uses a virtual financial advisor to help you lay out financial goals such as saving and budgeting or reducing debt. The site does not require you to import your various financial accounts, but you do have to give approximate balances. Also of note is that the Site is registered with the SEC and thereby must comply with SEC rule.

During times of disruption in an industry or economy, innovators enter in an attempt to add value and steal market share from the existing players. Major disruption exists in the financial markets and the financial services industry. My guess is that more and more of these technologically savvy competitors will enter your market.

You have no choice but to embrace these technologies into your practices and figure out complementary methods of adding value for your customers.

For additional resources, check out The Best Online Tools for Personal Finance in The Wall Street Journal.

Prior to participating in the program, certain high schools had passage rates as low as 3%.

The report also demonstrates that the act of participating in the program encourages more students to budget, use banks, save money, set financial goals, compare prices and talk about money openly with family members. Participating students increased their savings rates by an average of 14% as a result of the Program and increased their financial goal setting by 18-20%.

To view the complete W!SE Financial Literacy Report, click here.

In stark contrast to this 2007 survey, in 2009, Charles Schwab published a “Young Adult and Money” Survey which revealed that 52% of young adults believe that the most important issue facing Americans is “making better choices about managing money”. Furthermore, more than half the respondents are now “very concerned about their financial future”.

Clearly, this shift in sentiment opens the door for financial advisors and professionals to market their expertise and gain the confidence and trust of this generation. If an advisor is able establish this trust, the relationship is boundless.

Both the 2007 and 2009 Surveys are below.

Charles Schwab Teen and Money Survey 2007

Charles Schwab Young Adults and Money Survey 2009

Charles Schwab is capitalizing on this shift with the “New to Investing” section of their website and by tailoring their advertising campaign to a younger audience…How are you capitalizing on this shift and ensuring that young adults have access to your expertise?