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Business Times
3 days ago
- Business
- Business Times
Gen Z, don't be fooled by GenAI financial advisers
THE wealth management industry is prepared to court its newest potential clients: Gen Z. Instead of trotting out older professionals with decades of experience, companies are utilising generative AI to develop digital assistants. These new 'experts' even come with the ability to use slang to appear relatable and relevant to their target demographic. Embracing the newest technology is yet another cultural shift in the financial services landscape that disrupts some of the norms in the industry. We've seen it with the development of robo-advisers and the rise of 'finfluencers'. Cue the traditionalists turning their noses up at how far the financial advice field has strayed from its origins. After all, future iterations of GenAI really could accelerate the long-prophesied doomsday for flesh-and-blood financial planners. But now isn't the time for humans to declare defeat. Until advanced versions of the technology arrive, people should be doubling down on the one significant advantage they have against their digital counterparts: soft skills. Providing investing advice is only one facet of the job. The role is part therapist, accountability coach and teacher. Real people can push back against panicked requests to sell in a turbulent market instead of simply executing an order. A person understands how and when to ask more questions to determine the reason behind a request for conservative investments such as bonds or CDs (certs of deposits) even at a young age when it's detrimental to be overly cautious. The problem for many young adults is that accessing this more holistic approach, which goes beyond stats and data, is costly. Financial advisers usually get paid in one of two ways: assets under management (AUM) – a percentage of a customer's investments each year – or a flat-rate fee. The latter varies based on the level of service. A comprehensive financial plan can cost thousands of dollars. AUM ranges from 0.25 to 1.5 per cent, with some advisers reducing the cost as the size of a portfolio grows. The greater barrier to entry is the possible minimum investable assets requirement, which often hovers between US$500,000 and US$1 million. Fifteen years ago, these factors prohibited access for millennials. A NEWSLETTER FOR YOU Friday, 3 pm Thrive Money, career and life hacks to help young adults stay ahead of the curve. Sign Up Sign Up Cost-effective alternatives This reality paved the way for cost-effective alternatives in the form of robo-advisers, such as Betterment and Wealthfront, with significantly lower AUM and no asset minimum. The companies sent shockwaves through the industry as many wondered if machines would finally usurp man. As years passed, it became obvious the two could have a symbiotic relationship. In fact, it turned out millennials ultimately did crave some soft skills, which led to platforms launching versions that gave customers access to humans. Instead of cratering the industry, the robo-advisers forced their living counterparts to compete in different ways. Some diversified their services, including offering virtual counsel, and others targeted less-affluent clientele. While it's easy for the regular consumer to conflate a robo-adviser with GenAI, the two are not the same. The latter is built on language-learning models instead of the mathematical-centric AI models and machine-learning algorithms that provide the underpinnings for companies such as Betterment and Wealthfront. Gen Z investors may be more attracted to GenAI because it can simulate how people speak and even look. Plus, the cohort is more primed to be early adopters of the tool. They've grown used to receiving free, one-size-fits-all money guidance online. A stunning 77 per cent of teens and 20-somethings use online platforms and social media to answer their money questions, according to a 2025 Credit Karma survey. But they should remember that the technology's modern iteration is new and, like humans, fallible, which results in inaccurate or misleading information known as 'hallucinations'. Bullish on AI Even with all these issues to resolve, companies are bullish on GenAI's ability to spit out 24/7 guidance and woo new clients. Arta Finance, a wealth management startup, is at the forefront of providing an AI financial adviser with Arta AI. The 'AI agents', as the company refers to its investment planner, product specialist, and research analyst offerings, can respond to queries by voice or text (and do so in the aforementioned generationally appropriate slang). Arta is only available to accredited investors and offers access to human professionals, but the company plans to make Arta AI available to other financial services companies – a move that could give all kinds of retail investors access to its product. It's likely that plenty of platforms won't wait to license the service and instead will develop their own. Robinhood Markets plans to launch Robinhood Cortex, an AI-powered digital research assistant, this fall. The app offers a variety of investing options, including Robinhood Strategies, the company's robo-adviser. Unlike Arta Finance's offering of real-life advisers alongside its AI agents, Robinhood customers can currently only access a support team, which is mostly available to handle administrative questions. And that's a huge pitfall. Companies that don't prioritise establishing relationships with real professionals can cause retail investors to panic in turbulent times, especially novice ones who are able to access advanced opportunities, such as trading options. Granting inexperienced customers access to higher-level investing products without proper support can be financially, mentally and emotionally ruinous. Robinhood should know. In 2020, it paid the largest Financial Industry Regulatory Authority fine in history – US$70 million – for its technical outages, lack of due diligence before approving customers to trade options and sending of misleading information. There is a place for AI in the financial advisory sector, and in due time, it will become a dominant feature. That part is clear. But it's also obvious that rushing the timing would be a mistake. BLOOMBERG
Fast Company
15-05-2025
- Business
- Fast Company
Open finance is coming: What's your moat?
Open finance is no longer a distant regulatory shift—it's a powerful force reshaping finance. In regions like the UK and EU, PSD2 regulations, which regulate how businesses and consumers make and receive payments, have already forced banks to open their APIs to third parties, breaking monopolies on customer data. Back-end connectors like Plaid and Yodlee have achieved critical mass, making it easier to link financial products. Meanwhile, markets like Australia and Brazil have embraced open finance frameworks, driving radical transformation. Today, various players can weave together different components of finance. Wealthfront combines robo-advisory with FDIC-insured banking. Apple has a credit card and controls significant tap-based payments. We're seeing embedded finance in non-financial platforms like Uber alongside entirely new business models like Rocket Money for managing subscriptions. And, similar to Rocket Money, Experian has moved beyond credit bureau services to providing an app to find and reduce recurring payments. For incumbents, the impact is visible: Customer loyalty erodes as fintechs, challengers, and native apps offer seamless, personalized experiences with better data integrations. Traditional revenue streams are under attack, and the old playbook of customer lock-in through inertia no longer works when users can switch providers by scanning a QR code or checking a box. The financial institutions that thrive will leverage open banking while identifying strong moats. So then the question becomes: What's your moat and how do you build it? CREATE THE TRUSTED BRAND A strong brand and trust moat are crucial when data is open and switching providers is easy. American Express (Amex) has built a reputation for exceptional service, fraud protection, and premium rewards, fostering loyalty even in a competitive market. Amex products are perceived as prestigious, and the company strives to make customers feel valued. How To Moat It: Pick an area where customers care deeply and focus on delivering superior products and experiences to build a loyal user base. MAKE IT DEVELOPER-FRIENDLY A seamless developer experience can drive adoption for financial services embedded into third-party platforms. Stripe built dominance by making payment integrations frictionless. Once developers build on a platform, switching becomes costly, creating stickiness and network effects. How To Moat It: Invest in easy-to-use APIs and developer tools to make your platform the go-to choice for embedding financial services. BUILD INDUSTRY VERTICAL INTEGRATION Owning a larger piece of the financial stack within a specific industry creates a powerful moat. GlossGenius integrates payment processing, scheduling, and business management tools for beauty professionals. By controlling both software and financial infrastructure, these platforms reduce reliance on third parties, increase margins, and create deep customer lock-in. How To Moat It: Identify an industry with fragmented financial tools and build an end-to-end solution that embeds finance directly into day-to-day operations. CREATE NETWORK EFFECTS The more users and businesses that rely on a financial platform, the harder it becomes for them to leave. PayPal and Venmo became dominant through widespread merchant adoption, making them default payment methods for small businesses, which in turn drove customers to establish accounts. How To Moat It: Develop features that make your platform more valuable as more people join through. These may be easy and free P2P payments or B2B accounting platforms tools like Intuit. EMBEDDED FINANCE AND DISTRIBUTION MOAT By embedding financial products into popular non-financial applications for businesses where users already spend time, companies create natural stickiness. Shopify exemplifies this strategy by integrating Shopify Payments and Capital directly into its e-commerce platform, so merchants can access payment processing and finance their businesses without leaving their store management interface. Shopify also lets them pay back loans directly from payment flows. How To Moat It: Partner with non-financial companies to embed your services, offer banking-as-a-service capabilities to let businesses integrate financial tools into their platforms, or build financial products directly into SaaS environments. DELIVER ROCK-SOLID SECURITY In an era of open finance, where data flows freely between platforms, security becomes a critical differentiator. Customers remain loyal to institutions offering superior fraud protection and data encryption. Apple Pay has built a strong security moat using tokenization, biometric authentication, and device-based encryption. Plaid has positioned itself as an intermediary that prioritizes security through encrypted data transfers and strict consumer consent controls. How To Moat It: Design your product to leverage better security, like Apple Pay uses NFC, and to use the latest capabilities. Then make the differentiations clear to lay users and explain how you are protecting them. The lesson here is clear: Rather than viewing open finance as a threat, forward-thinking companies will see it as an opportunity to redefine their role in the financial ecosystem. This can mean smart application and product design, better use of technology, or more old-school approaches like delivering superior service for word-of-mouth growth. One thing's for sure: As open finance removes barriers to switching, every financial company needs to design a moat and figure out new ways to retain customers for the long run.
Yahoo
26-04-2025
- Business
- Yahoo
4 Moves Savvy Investors Are Making Amid Market Volatility and Tariff Rollouts
Ever since President Donald Trump announced his plans for a tariff rollout, the markets have experienced extreme volatility. If you've seen your own portfolio take a hit, you may be wondering the best course of action to take. Find Out: Read Next: 'At Wealthfront, we believe that staying the course is one of the most powerful things an investor can do,' said Alex Michalka, vice president of research at Wealthfront. 'Market volatility is inevitable, and we don't recommend investors change their strategy in response to short-term market moves. 'Reacting emotionally to short-term market movements or trying to time the market often leads to poor outcomes,' he continued. 'Instead, we encourage clients to focus on their long-term goals and what they can control — taxes, fees and diversification.' Here's what savvy investors are doing in the current economic climate. Savvy investors aren't pulling out funds due to market downswings — in fact, they're investing more. 'At Wealthfront, it's been encouraging to see our clients continue to invest through the market volatility,' Michalka said. 'Deposits into our globally diversified index fund portfolios increased by 330% on the day after tariffs were announced, and stayed elevated [the next day].' While some of this could be due to investors 'buying the dip,' Michalka does not recommend this as an investment strategy. 'We encourage regular investing rather than waiting for what seems like an attractive buying opportunity — for example, waiting for a market decline to invest,' he said. 'The general trend of markets is to go up, and if you're waiting for a 'dip' to invest, you may end up forgoing a lot of positive returns until one occurs. 'We think it's best to stick to your investing plan regardless of what the market is doing,' Michalka continued. 'That said, short-term stock market declines do offer investment opportunities because it allows you to essentially buy investments while they're 'on sale.'' Check Out: Many Wealthfront clients have been taking action to further diversify their investment portfolios, including increasing European and Chinese stock allocations. Since March 1, there has been a nearly 200% increase in clients adding the Vanguard European Stock Index Fund ETF (VGK), and from from Jan. 1 to April 3, the number of clients adding ETFs tracking Chinese stocks have increased by nearly 40%. 'Recent market volatility serves as a timely reminder of the importance of diversification,' Michalka said. 'If your portfolio is heavily concentrated in U.S. equities, adding exposure to global markets can be a smart way to build long-term resilience. 'While U.S. stocks have outperformed international markets for much of the past decade, history shows they don't always lead,' he continued. 'So far in 2025, emerging markets have outperformed the U.S. by more than 7%, and developed international markets by over 14%.' Investors are also increasing their allocations to gold, with the number of Wealthfront clients adding gold ETFs increasing by more than 25% from Jan. 1 to April 3. 'If your portfolio is heavily concentrated in equities, incorporating other assets like bonds or gold can be a smart way to reduce risk to an appropriate level,' Michalka said. Losing money in the market is never a pleasant experience, but it does provide a tax benefit. 'It's not fun to watch your portfolio temporarily decline in value when the market is volatile, but tax-loss harvesting can be a silver lining,' Michalka said. 'When the value of an investment dips below its purchase price, you can sell it at a loss and replace it with a similar investment. 'This allows you to 'harvest' the loss and maintain the overall risk and return characteristics of your portfolio. Come tax time, you can use that loss to lower your tax bill, generating a 'tax alpha' or incremental return from tax-loss harvesting.' Following the April 2 tariff announcement when the market dipped, Wealthfront traded over $4.5 billion on behalf of its clients, and helped them realize significant tax-loss harvest benefits. Its software harvested more than $100 million during this time, helping clients reduce their tax bills. In February and March, Wealthfront saw more net flows into cash than investments as investor sentiment turned negative. Keeping sufficient funds in cash is always a savvy move. 'Cash provides liquidity for short-term needs and unexpected expenses, while also serving as a stabilizer to protect the value of your portfolio, especially during market downturns,' Michalka said. 'A strong emergency fund offers peace of mind, which can be especially important when the market is volatile. 'For most people, this means setting aside enough cash to cover three to six months' worth of living expenses,' he continued. 'The ideal amount will depend on factors such as your age, profession, investable assets and the financial needs of your extended family.' Michalka recommended keeping an emergency fund in a high-yield savings account. 'This strategy allows you to earn a return on your cash while keeping the money you need for short-term purposes — or may need for an emergency — safe.' More From GOBankingRates 5 Luxury Cars That Will Have Massive Price Drops in Spring 2025 4 Things You Should Do if You Want To Retire Early 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth How Much Money Is Needed To Be Considered Middle Class in Every State? This article originally appeared on 4 Moves Savvy Investors Are Making Amid Market Volatility and Tariff Rollouts Sign in to access your portfolio
Yahoo
12-04-2025
- Business
- Yahoo
US stocks end up. S&P 500 and Nasdaq post best week since November despite tariff swings.
U.S. stocks bounced back in early afternoon, helped by some dip-buying after a brief decline earlier on a weaker-than-expected consumer sentiment reading in the University of Michigan's preliminary April survey. The mid-month reading on sentiment fell to 50.8 from 57.0 in March and below the Dow Jones consensus estimate for 54.6. Inflation is becoming a major concern, according to the report, with expectation for inflation a year from now jumping to 6.7%, the highest level since November 1981 and up from 5% in March. Expectations for economic conditions also dropped 10.3% to 47.2, the lowest since May 1980. The drop in consumer sentiment has been alarming to some economists who say when consumers feel nervous and gloomy about the economy, they tend to close their wallets. Consumers make up about 70% of the economy, so a slowdown in consumer spending will take a toll on economic growth. That pressured stocks around mid-morning, but buyers emerged to buy the dip and pushed all three major indexes back in the green. Despite stocks' violent swings, all three major stock indexes are on pace for gains this week. The S&P 500 and Nasdaq are on pace for their best weekly performance since November. "It's been a challenging week, but also a moment to seek opportunities and not succumb to fear," said Mark Dowding, BlueBay chief investment officer at RBC Global Asset Management. Indeed, individual investors have been buying the dips throughout the downturn. On April 9, the day Trump announced a 90-day tariff pause, investing platform Wealthfront said it saw most money flowing into accounts in the early morning hours before the tariff pause was announced. Additionally, on April 8 when markets tanked, Wealthfront saw a significant increase in deposits into bond ladders, making it the highest single day for bond ladder deposits this year and signaling that some investors are taking advantage of rising Treasury yields. Bond ladders are created by buying bonds at varying maturities. Investors use them to provide a more predictable income stream and potentially reduce interest rate risk if rates move. If rates rise, investors won't be locked into a single bond with a lower rate. The blue-chip Dow rose 1.56%, or 618.99 points to 40,212.65; the S&P 500 added 1.81%, or 95.31 points, to 5,363.36; and the tech-heavy Nasdaq rose 2.06%, or 337.14 points, to 16,724.46. The benchmark 10-year yield rose to 4.478%. Gold, seen as a safe asset during tumultuous times, rallied past $3,200 per ounce to set another record high early in the day. It was last up 2.23%. Overnight, China increased its tariff on U.S imports to 125% but signaled it wouldn't match anymore increases by the U.S. 'Even if the U.S. continues to impose higher tariffs, it would be economically meaningless and would become a joke in the history of the world economy," China's finance ministry said. Despite those comments, the White House said Trump is "optimistic" China will seek a deal with the U.S. Meanwhile, the European Union said its trade representative would fly to Washington on Sunday to 'try and sign deals," a sign a full-out global trade war may be averted. That sentiment helped stocks shortly after the open reverse a small part of Thursday's freefall, but money managers warn investors should remain cautious. Stocks swooned Thursday on fears President Donald Trump's triple-digit tariff on China would significantly damage the U.S. economy and corporate profits. Trump kept his 10% tariff on all countries but put reciprocal tariffs on hold for 90 days for all countries except China. Because China retaliated, Trump raised his tariff on Chinese goods to a total 145%. "While it was positive that most tariffs were lowered to 10%, the 145% tariff on China will still impair corporate profits," said Mike O'Rourke, chief market strategist at JonesTrading. "The $440 billion of goods the U.S. imported from China last year was second only to Mexico," he said. "Those low production-cost goods, whether they are technology, apparel, or materials, are important to corporate earnings. The auto and metals tariffs remain in place, and pharma and semiconductor tariffs are on deck. Exemptions may be coming, but they are not here yet." Wholesale prices in March unexpectedly fell 0.4%, posting the first decline since October 2023. The drop compares with February's 0.1% gain and economists' forecasts for a 0.2% rise. Excluding the volatile food and energy sectors, so-called core wholesale fell 0.1% against the estimate for a 0.3% increase. Wholesale prices are what businesses pay for their goods and services and sometimes seen as the first line for inflation to show up. This comes on the heesl of annual consumer inflation on Thursday showing a 2.4% rise in March, below economists' forecasts and February's 2.8%. It was the lowest annual increase since September. Still, some economists pointed out the inflation data are old, and "if tariffs stay in place, they will push inflation considerably higher in coming months," said Bill Adams, chief economist at Comerica Bank. Comforting words, though, came from New York Federal Reserve President John Williams. Williams said the U.S. economy is not entering a period of high inflation and low growth, and the U.S. Federal Reserve will act to keep so-called "stagflation" at bay. JP Morgan, Wells Fargo, Morgan Stanley and BlackRock kicked off earnings season. They provided the first glimpse into how businesses and consumers may be handling tariff volatility and how they see tariffs unfolding this year. Wells Fargo, JP Morgan, Blackrock and Morgan Stanley all beat quarterly earnings and revenue estimates. Chief executives of those banks warned of uncertainty ahead due to tariffs. Wells Fargo CEO Charlie Scharf said his bank is "prepared for a slower economic environment in 2025, but the actual outcome will be dependent on the results and timing of the policy changes.' JP Morgan and Wells Fargo said they haven't seen a surge in companies tapping their credit lines. During times of stress and anxiety, companies grab cash from these credit lines to shore up financials, just in case. JP Morgan CEO Jamie Dimon said consumers also contninued to spend, though he said some may have been buying ahead of tariffs. Shares of JP Morgan closed up 4%; Wells Fargo fell almost 1 % after it lowered its full-year net interest income expectations; BlackRock rose 2.33%; and Morgan Stanley added 1.43%. Novartis said Thursday it will spend $23 billion over the next five years to expand in the U.S. The drugmaker expects this will create about 1,000 new jobs at Novartis, and lead to around 4,000 other jobs in the U.S. outside of Novartis. The company will be able to make domestically all of its medicines for the U.S., it added. Shares gained almost 4%. Frontier Group cut its outlook for the first three months of the year and pulled its full-year outlook, citing weaker-than-expected demand and economic uncertainty. Shares of the discount airline tumbled 5.6%. Stellantis said its global shipments fell to 1.2 million vehicles in the first three months of the year. That's down 9% from a year ago. The drop was primarily due to lower North American production, extended holiday downtime in January, product transitions and lower van sales in Europe, it said in a press release. Shares of the carmaker shed about 0.5%. Bitcoin rose back above the key $80,000 level, last up 5.23% at $83,756.51. Investors may watch to see if insiders sell any Trump digital tokens on April 17. Forty million of the tokens, recently worth more than $300 million, will be unlocked that day, meaning the owners of those tokens will be able to sell them for the first time since the Trump coin launched in January, according to the Trump cryptocurrency's website. A company controlled by the Donald J. Trump Revocable Trust is among the owners that will be able to sell, according to Trump's 2024 public financial disclosure required for federal candidates. The story was updated with new information. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday. This article originally appeared on USA TODAY: Stock market ends higher on the day and week despite wild tariff ride Sign in to access your portfolio
Yahoo
11-04-2025
- Business
- Yahoo
Retail investors are buying the dip: Investment platforms report spikes after Trump tariff market declines
The volatility afflicting U.S. and international stock and bond markets this week amid President Donald Trump's tariff push has analysts and institutional investors ringing alarm bells about a possible recession and rethinking big investments and deals. But amid all of the uncertainty and tumult, many retail investors diving into the market in hopes of snapping up stocks on the cheap—buying the dip in other words. Investment platforms are reporting record transaction volume amid the market rollercoaster. On April 3, the day after Trump announced his "Liberation Day" tariffs on virtually every U.S. trading partner, deposits in Wealthfront's globally diversified index investment accounts were up more than 330% compared to the previous, the financial services company reports. At the same time, deposits into individual stock investment accounts were up nearly 500%. U.S. stocks took a beating that day, suffering their steepest declines since 2020. What are retail investors buying? According to Wealthfront, Magnificent Seven stocks including Nvidia, Amazon, and Apple were popular—Nvidia deposits spiked nearly 400% on April 3, while Amazon and Apple deposits increased more than 500%. They've tapered off some since then but remain at a higher level than before the tariffs were announced. Vanguard's S&P 500 ETF (VOO) and State Street's SPDR S&P 500 ETF Trust (SPY) have also drawn increased interest. Investors were back at it early on April 9, according to Wealthfront, when the market was in the midst of another rout. They were apparently taking the president's advice: Trump posted on Truth Social early in the day, "THIS IS A GREAT TIME TO BUY." Then, later that afternoon, he announced a 90-day pause on many tariffs—sending stocks soaring and sparking accusations of market manipulation. That said, aside from some post-tariff announcement surges, retail investors are behaving cautiously overall. February and March saw more net flows into cash than investments, according to Wealthfront, reflecting broader negative investor sentiment. Stocks aren't the only asset class seeing a surge. According to Wealthfront, despite concerns in the broader financial industry, U.S. bonds have also beem popular, given their rising yields. The company says Tuesday, April 8 was the highest single day of the year so far for bond ladder deposits—a term that describes buying bonds with different maturity dates. International investors are making similar moves, says Robert Lande, president of Tradu, a multi-asset trading platform with a global customer base. On Tradu, investors have been actively trading currencies: consistently shorting Yen and the Euro and going long U.S. dollars and Sterling. Many investors have also stayed long on gold since April 2, which has proven itself as a haven in this tumultuous time. "They have been surprisingly, perhaps, upbeat on the U.S. picture, and still remain pretty positive about it," says Lande, noting investors are looking at the U.S. relative to other countries. "They absolutely might have a view that [tariffs] are not particularly good, but that's worse for others than for the U.S. So I'm not really seeing pulling out of the U.S. at this point." Though there has been plenty of pressure over the past week as stocks have slid, Lande says retail investors seem to be patient with the market's moves. As U.S. companies start to report earnings in earnest, the outlook may change, he says. "It's an incredibly complex environment," says Lande. This story was originally featured on Sign in to access your portfolio
