“Financial planning in the absence of an investment strategy designed to implement the plan is a f***ing fortune cookie. An investment portfolio absent the dictates of the goals from a financial plan is like building a house without a blueprint. Neither or these things is worth much without the other. But delivered in concert, they are essential and worthy of a fee for the people who are going to be overseeing both.”
Josh Brown, “What People Will Pay For”
I was greeted this morning by a CNBC alert that JP Morgan Chase, in an effort to provide a platform to attract Millennials, was going to begin offering an investing app with free trades for all (there end up being tiers for the free trading after the first year; immediately I thought of Josh Brown’s quote from a couple of weeks ago.
The introduction of an ultra-low-cost trading platform connected to bank accounts may be a blessing for some investors, but will ultimately end up being a curse for many others.
Investing apps like the one Chase will be offering aren’t new; Robinhood, Betterment, and others have been in the market for years and have had a lot of success gaining customers. However, if I read the report correctly, everyone with a Chase account will soon have access to the new app soon and it will be connected to their bank accounts at Chase. With a few swipes on an iPhone, impulsive investing can occur with no real strategy other than FOMO. As long as markets go up, there won’t be any problems. But, markets don’t always go up and when they crash, I fear we’ll see the great crypto run of late 2017 on a much larger scale.
I’m all for innovation, lowering the cost of investing, and exposing people to the power of investing earlier, but not without a plan to guide the investment strategy. The long-term plan for the new app is to also add a robo-advisor option–it’s more like robo-allocator, which is better than nothing, but still not what most investors need.
Millennials, the target of this initiative, need advice with student loans, saving for emergency funds, purchasing homes, proper protections for their young families, avoiding lifestyle creep, etc.–none of which is addressed through investment apps. If you are a Millennial (or anyone for that matter) looking for advisors working with their clients in non-traditional ways (aka non-AUM models) give the XY Planning Network a look. Full disclosure: I’m a member of the XY Planning Network.
I think the future of financial planning is a combination of the work financial advisors currently do with the innovations in investing technology to come. There’s no reason a financial advisor could not leverage Chase’s technology within their practice, but to offer every Chase customer the ability to invest with no guidance is dangerous.
Disclaimer: Nothing on this blog should be considered advice, or recommendations. If you have questions pertaining to your individual situation you should consult your financial advisor. For all of the disclaimers, please see my disclaimer page.